Mutual fund performance at long horizons

Hendrik Bessembinder, Michael J. Cooper and Feng Zhang

Journal of Financial Economics, 2023, vol. 147, issue 1, 132-158

Abstract: The percentage of U.S. equity mutual funds that outperform the SPY ETF over the last 30 years decreases substantially as the horizon over which returns are measured is increased. Further, some funds with positive monthly alpha estimates have negative long-horizon abnormal returns. These results reflect positive skewness in the distribution of fund returns that increases with horizon, and highlight the limitations of conditional arithmetic means of short-horizon returns (e.g., alpha) for long-horizon investors. We tabulate an aggregate wealth loss of $1.02 trillion to mutual fund investors over our 30-year sample, when opportunity costs are based on beta-adjusted SPY returns.

Keywords: Long-horizon performance; Mutual funds; Skewness; Investor wealth loss (search for similar items in EconPapers)
JEL-codes: G10 G23 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X22002264
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:147:y:2023:i:1:p:132-158

DOI: 10.1016/j.jfineco.2022.10.006

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().