Identify Skilled and Unskilled Mutual Funds

55 Pages Posted: 27 Jan 2020

See all articles by Haitao Huang

Haitao Huang

J. Mack Robinson College of Business, Georgia State University

Lei Jiang

Tsinghua University

Xuan Leng

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE)

Liang Peng

Georgia State University - Risk Management & Insurance Department

Date Written: January 4, 2020

Abstract

The previous bootstrap tests for funds with zero alpha have a distorted test size when the sample sizes of some funds are small and might fail to detect skilled and unskilled funds when both kinds coexist. We develop the theory for a valid bootstrap Hotelling's T-squared test to identify a pool of funds with zero alpha and propose two methods to confirm whether the top- (bottom-) ranking funds are skilled (unskilled) compared to the identified zero-alpha pool. An examination of those skilled funds and unskilled funds indicates that their characteristics are dramatically different from many perspectives.

Keywords: Bootstrap, Edgeworth expansion, Hotelling's T-squared test, Mutual fund

JEL Classification: G11;G23; C58

Suggested Citation

Huang, Haitao and Jiang, Lei and Leng, Xuan and Peng, Liang, Identify Skilled and Unskilled Mutual Funds (January 4, 2020). Available at SSRN: https://ssrn.com/abstract=3513979 or http://dx.doi.org/10.2139/ssrn.3513979

Haitao Huang

J. Mack Robinson College of Business, Georgia State University ( email )

35 Broad St
Atlanta, GA 30303
United States

Lei Jiang (Contact Author)

Tsinghua University ( email )

Beijing, 100084
China

Xuan Leng

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE) ( email )

A 307, Economics Building
Xiamen, Fujian 10246
China

Liang Peng

Georgia State University - Risk Management & Insurance Department

P.O. Box 4036
Atlanta, GA 30302-4036
United States

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