An evaluation on the true statistical relevance of Jensen's alpha trough simulation: An application for Germany

Javier Otamendi (), Luis Miguel Doncel Pedrera (), Pilar Grau () and Jorge Sainz ()
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Javier Otamendi: URJC
Pilar Grau: URJC
Jorge Sainz: URJC
Authors registered in the RePEc Author Service: Jorge Sainz () and Jorge Sainz

Economics Bulletin, 2008, vol. 7, issue 10, pages 1-9

Abstract: Mutual fund managers’ ability to generate continuous positive value in excess to a relevant benchmark index is a crucial aspect for its evaluation. Focusing on the German market, in this research we apply several simulation methods that avoid statistical problems related to multiple hypothesis testing in traditional financial techniques. By doing so we obtain a threshold value that delimits what is considered the true null hypothesis. Our main result is that managers’ action are of little significance with only a small part of them adding excess value to mutual funds they run.

Keywords: Jensen's alpha; Persistence; Simulation (search for similar items in EconPapers)
JEL-codes: G2 C0 (search for similar items in EconPapers)
Date: 2008-07-23
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