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New Evidence on Mutual Fund Performance: A Comparison of Alternative Bootstrap Methods

Published online by Cambridge University Press:  08 May 2017

David Blake ,
Tristan Caulfield ,
Christos Ioannidis  and
Ian Tonks
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Abstract

We compare two bootstrap methods for assessing mutual fund performance. The first produces narrow confidence intervals due to pooling over time, whereas the second produces wider confidence intervals because it preserves the cross correlation of fund returns. We then show that the average U.K. equity mutual fund manager is unable to deliver outperformance net of fees under either bootstrap. Gross of fees, 95% of fund managers on the basis of the first bootstrap and all fund managers on the basis of the second bootstrap fail to outperform the luck distribution of gross returns.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 52 , Issue 3 , June 2017 , pp. 1279 - 1299
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2017 

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Footnotes

1

The data set used in this paper was constructed while Tonks was an Economic and Social Research Council (ESRC) Business Fellow at the United Kingdom’s Financial Services Authority (FSA) in 2009 (RES-186-27-0014), and Tonks is obliged to the FSA’s Economics of Regulation Unit for hosting this visit. We are grateful for comments and discussion from Peter Andrews, Alok Bhargava, Stephen Brown (the editor), Qun Harris, Allan Timmermann, and Russell Wermers (the referee).

We direct your attention also to our Internet Appendix (available at www.jfqa.org) that provides robustness tests of our findings.

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