Mutual Fund Performance: An Approach to Identifying the Top Performing Funds

10 Pages Posted: 16 Nov 2017

See all articles by Irina B. Mateus

Irina B. Mateus

Aalborg University

Cesario Mateus

Aalborg University Business School

Natasa Todorovic

City University London - The Business School

Date Written: November 14, 2017

Abstract

Two recent augmentations of standard factor models in the literature enable investors to compute benchmark-adjusted alphas (Angelidis et al., 2013) and peer-group adjusted alphas (Hunter et al., 2015). We show that by and large the funds placed in the top performance quartile using either one of these models do not produce statistically significantly higher Sharpe ratios than the funds in the bottom quartile one year ahead. However, we find that the joint predictive ability of these models is strong: using both models at the same time to select the winner funds produces statistically significantly superior Sharpe ratios one-year ahead.

Keywords: US Equity Mutual Funds, Benchmark-Adjusted Alphas, Peer-Group-Adjusted Alphas, Performance Ranking

JEL Classification: G11, G12, G23

Suggested Citation

B. Mateus, Irina and Mateus, Cesario and Todorovic, Natasa, Mutual Fund Performance: An Approach to Identifying the Top Performing Funds (November 14, 2017). Available at SSRN: https://ssrn.com/abstract=3071026 or http://dx.doi.org/10.2139/ssrn.3071026

Irina B. Mateus

Aalborg University ( email )

Fredrik Bajers Vej 7E
Aalborg, DK-9220
Denmark

Cesario Mateus (Contact Author)

Aalborg University Business School ( email )

Aalborg
Denmark

Natasa Todorovic

City University London - The Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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