Mutual Fund's Net Economic Alpha: Definition and Evidence

Journal of Investment Management (JOIM), Second Quarter 2013

38 Pages Posted: 15 Jun 2013 Last revised: 16 Jun 2013

See all articles by Sharon Garyn-Tal

Sharon Garyn-Tal

Max Stern Academic College of Emek Yezreel

Beni Lauterbach

Bar-Ilan University - Graduate School of Business Administration; European Corporate Governance Institute (ECGI)

Date Written: June 14, 2013

Abstract

It is sometimes argued that existing methodologies for assessing mutual fund's performance are unfair, as fund's return is taken net of expenses and benchmark return is gross of expenses. Examining over 1000 U.S. non-specialized mutual funds in 2001-2009, we nd that the abovementioned problem is minute - the net economic alpha, an alpha that accounts for the actual costs of investing in benchmarks via ETFs, yields similar fund's ranking and classi cation as the traditional methods. Also interesting, the average net economic alpha is only slightly negative, suggesting that the mutual funds industry is not inferior.

Keywords: Mutual funds, performance evaluation

JEL Classification: G00

Suggested Citation

Garyn-Tal, Sharon and Lauterbach, Beni, Mutual Fund's Net Economic Alpha: Definition and Evidence (June 14, 2013). Journal of Investment Management (JOIM), Second Quarter 2013. Available at SSRN: https://ssrn.com/abstract=2279624

Sharon Garyn-Tal (Contact Author)

Max Stern Academic College of Emek Yezreel ( email )

Emek Yezreel, 19300
Yezreel 19300
Israel

Beni Lauterbach

Bar-Ilan University - Graduate School of Business Administration ( email )

Ramat Gan
Israel

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Register to save articles to
your library

Register

Paper statistics

Downloads
76
Abstract Views
482
rank
314,349
PlumX Metrics