The win–loss ratio as an ability signal of mutual fund managers: a measure that is less influenced by luck

Y. Chung () and Thomas Kim ()

Financial Markets and Portfolio Management, 2015, vol. 29, issue 4, 335 pages

Abstract: To better identify skilled mutual fund managers, we develop a mutual fund performance predictor that is less influenced by luck. We posit that it is unlikely for a fund manager to consistently hold numerous above median performing stocks unless he has stock-picking ability. Using the number of above median performing stocks as a fund performance predictor (win–loss ratio), we find that a higher win–loss ratio in 1 year is associated with 2–4 % additional risk-adjusted return in the next. The ratio also has an economically and statistically significant predictive power after controlling for other fund performance predictors in the literature. Copyright Swiss Society for Financial Market Research 2015

Keywords: Mutual funds; Luck vs. skill; Win–loss ratio; Performance evaluation; Holdings data; G11 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:kap:fmktpm:v:29:y:2015:i:4:p:301-335

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DOI: 10.1007/s11408-015-0255-3

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