Bill Gross' Alpha: The King Versus the Oracle

19 Pages Posted: 19 Apr 2019

See all articles by Richard Dewey

Richard Dewey


Aaron Brown

New York University (NYU) - Courant Institute of Mathematical Sciences; AQR Capital Management, LLC

Date Written: March 21, 2019


We set out to investigate whether ''Bond King" Bill Gross demonstrated alpha (excess average return after adjusting for market exposures) over his career, in the spirit of earlier papers asking the same question of ''Oracle of Omaha," Warren Buffett. The journey turned out to be more interesting than the destination. We do find, contrary to previous research, that Gross demonstrated alpha at conventional levels of statistical significance. But we also find that result depends less on the historical record than on whether we take the perspective of academics interested in market efficiency, investors picking a fund or someone (say a potential employer) asking whether a manager has skill or is throwing darts to pick positions. These are often thought to be overlapping or even identical questions. That's not completely unreasonable in equity markets, but in fixed income these are distinct. We also find quantitative differences, mainly that fixed-income securities have much higher correlations with each other than equities, make alpha 4.5 times as hard to measure for Gross than Buffett. We don't think our results will have much practical effect on attitudes toward Gross as an investor, but we hope they will advance understanding of what alpha means and appropriate ways to estimate it.

Suggested Citation

Dewey, Richard and Brown, Aaron, Bill Gross' Alpha: The King Versus the Oracle (March 21, 2019). Available at SSRN: or

Aaron Brown

New York University (NYU) - Courant Institute of Mathematical Sciences ( email )

New York University
New York, NY 10012
United States
10024 (Fax)

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

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