Improved inference in the evaluation of mutual fund performance using panel bootstrap methods

David Blake, Tristan Caulfield, Christos Ioannidis and Ian Tonks

Journal of Econometrics, 2014, vol. 183, issue 2, 202-210

Abstract: Two new methodologies are introduced to improve inference in the evaluation of mutual fund performance against benchmarks. First, the benchmark models are estimated using panel methods with both fund and time effects. Second, the non-normality of individual mutual fund returns is accounted for by using panel bootstrap methods. We also augment the standard benchmark factors with fund-specific characteristics, such as fund size. Using a dataset of UK equity mutual fund returns, we find that fund size has a negative effect on the average fund manager’s benchmark-adjusted performance. Further, when we allow for time effects and the non-normality of fund returns, we find that there is no evidence that even the best performing fund managers can significantly out-perform the augmented benchmarks after fund management charges are taken into account.

Keywords: Mutual funds; Unit trusts; Open-ended investment companies; Performance measurement; Factor benchmark models; Panel methods; Bootstrap methods (search for similar items in EconPapers)
JEL-codes: C15 C58 G11 G23 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:183:y:2014:i:2:p:202-210

DOI: 10.1016/j.jeconom.2014.05.010

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