52 Pages Posted: 28 May 2017 Last revised: 17 Sep 2017
Date Written: September 1, 2017
This study analyzes the out-of-sample performance of a variety of variables shown in prior work to forecast future mutual fund alphas. Overall, we find that the degree of predictability, as measured by alpha spreads from quintile sorts or by cross-sectional regression slopes, falls by at least half out of sample. We conclude that these shrinking spreads are in part consistent with data snooping biases but that a more important driver may be changes in the degree of market efficiency. We find little evidence that the declines are the result of learning by investors or fund managers.
Keywords: mutual funds, out-of-sample performance, market efficiency
JEL Classification: G12, G14, G23
Suggested Citation: Suggested Citation
Jones, Christopher S. and Mo, Haitao, Out-of-Sample Performance of Mutual Fund Predictors (September 1, 2017). Available at SSRN: https://ssrn.com/abstract=2975430 or http://dx.doi.org/10.2139/ssrn.2975430