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Do mutual funds deliver alpha? A Bayesian and bootstrap analysis

  • Ning Xu*
  • , Zhi Xin Liu
  • *Corresponding author for this work
  • Beihang University

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

We apply a new bootstrap statistical technique to distinguish between 'skill' and 'luck' for individual funds. This methodology allows for non-normality in the idiosyncratic risk of the funds-a major issue when considering those funds which appear to be either very good or very bad performers, since these are the funds which investors are primarily interested in identifying. We find that the best funds performance cannot be explained by luck, there exists stock picking ability among a relatively small number of top performing mutual funds. Moreover, we show that Bayesian measures, which help overcome the short-sample problem inherent in mutual fund returns, lead to superior performance predictability.

Original languageEnglish
Title of host publication2009 International Conference on Business Intelligence and Financial Engineering, BIFE 2009
Pages812-816
Number of pages5
DOIs
StatePublished - 2009
Event2009 International Conference on Business Intelligence and Financial Engineering, BIFE 2009 - Beijing, China
Duration: 24 Jul 200926 Jul 2009

Publication series

Name2009 International Conference on Business Intelligence and Financial Engineering, BIFE 2009

Conference

Conference2009 International Conference on Business Intelligence and Financial Engineering, BIFE 2009
Country/TerritoryChina
CityBeijing
Period24/07/0926/07/09

Keywords

  • Bayesian
  • Bootstrap
  • Mutual fund

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