56 Pages Posted: 28 Nov 2005 Last revised: 17 Oct 2013
Date Written: September 1, 2005
We apply a new bootstrap statistical technique to examine the performance of the U.S. open-end, domestic-equity mutual fund industry over the 1975 to 2002 period. This bootstrap approach is necessary because the cross-section of mutual fund alphas has a complex, non-normal distribution – due to heterogeneous risk-taking by funds as well as non-normalities in individual fund alpha distributions. Our bootstrap approach reveals findings that differ from many past studies. Specifically, we find that a sizable minority of managers pick stocks well enough to more than cover their costs; moreover, the superior alphas of these managers persist.
Keywords: mutual funds, performance evaluation, bootstrap
JEL Classification: G11
Suggested Citation: Suggested Citation
Kosowski, Robert and Timmermann, Allan G. and Wermers, Russ and White, Jr., Halbert L., Can Mutual Fund 'Stars' Really Pick Stocks? New Evidence from a Bootstrap Analysis (September 1, 2005). Available at SSRN: https://ssrn.com/abstract=855425 or http://dx.doi.org/10.2139/ssrn.414441
By Russ Wermers