 UK equity mutual fund alphas make a comebackIrina B. Mateus, Cesario Mateus and Natasa Todorovic International Review of Financial Analysis, 2016, vol. 44, issue C, 98-110 Abstract: In this study, we re-visit the performance of 887 active UK equity mutual funds using a new approach proposed by Angelidis, Giamouridis, and Tessaromatis. The authors argue that mutual funds stock selection is driven by the benchmark index, so if the benchmark generates alpha, there will be a bias in interpretation of manager's stock-picking ability. In their model, the alpha of a fund is adjusted by the benchmark's alpha. By applying this method, we eliminate bias inflicted by the persistently negative alphas of FTSE 100 Index in the period 1992–2013. We find that adjusted Fama–French and Carhat alphas of UK equity mutual funds are higher than those implied by the standard three- and four-factor models and are overall positive, contrary to most of the existing literature on UK fund performance. This result is consistent across funds' investment styles and robust to the use of FTSE Small Cap as benchmark for a sub-sample of small cap funds. Keywords: Fama–French; Carhart; Adjusted alphas; UK equity funds performance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:44:y:2016:i:c:p:98-110 DOI: 10.1016/j.irfa.2016.01.004 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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