Bootstrap Analysis of Mutual Fund Performance

81 Pages Posted: 27 Jan 2020 Last revised: 13 May 2021

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: August 28, 2020

Abstract

We show that two prominent bootstrap tests for fund performance evaluation have distorted test sizes and lack test power to detect skilled funds when a substantial number of unskilled funds are present. We develop the theory for a valid bootstrap Hotelling’s T-squared test allowing for serial correlations and cross-sectional dependence in fund residuals. Applying the new bootstrap test in a sequential testing procedure, our empirical analysis finds that skilled funds are more engaged in active management and hold stocks with higher expected anomalous returns.

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

JEL Classification: G11;G23; C58

Suggested Citation

Huang, Haitao and Jiang, Lei and Leng, Xuan and Peng, Liang, Bootstrap Analysis of Mutual Fund Performance (August 28, 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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