The Dynamics of Average Mutual Fund Alphas

31 Pages Posted: 16 Dec 2009

See all articles by Diana Budiono

Diana Budiono

Syntrus Achmea Asset Management

Martin Martens

Erasmus University Rotterdam (EUR); Robeco Asset Management

Marno Verbeek

Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM); Netspar

Date Written: December 5, 2009

Abstract

The average alpha of mutual funds is an indication of whether it pays off to invest in actively managed funds. In this study we show that a substantial part of the variation in the average alpha can be explained by exogenous factors. The most important factors are the average expense ratio, the ratio between skilled and unskilled funds, and combining the average turnover ratio with the skill ratio and trading costs. The latter shows that average turnover hurts the average funds performance due to there not being enough skilled funds.

Keywords: mutual funds, risk-adjusted returns, dynamics of alphas

JEL Classification: G11, G14, G19

Suggested Citation

Budiono, Diana Patricia and Martens, Martin P.E. and Verbeek, Marno, The Dynamics of Average Mutual Fund Alphas (December 5, 2009). Available at SSRN: https://ssrn.com/abstract=1522915 or http://dx.doi.org/10.2139/ssrn.1522915

Diana Patricia Budiono (Contact Author)

Syntrus Achmea Asset Management ( email )

PO box 3183
Utrecht, 3502 GD
Netherlands

Martin P.E. Martens

Erasmus University Rotterdam (EUR) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1253 (Phone)
+31 10 408 9162 (Fax)

Robeco Asset Management ( email )

Rotterdam, 3011 AG
Netherlands

Marno Verbeek

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands
+31 10 408 2790 (Phone)

HOME PAGE: http://www.rsm.nl/mverbeek

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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