Picking Funds with Confidence

Niels S. Grønborg (), Asger Lunde (), Allan Timmermann () and Russell Wermers ()
Additional contact information
Niels S. Grønborg: Aarhus University and CREATES, Postal: Department of Economics and Business Economics, Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Asger Lunde: Aarhus University and CREATES, Postal: Department of Economics and Business Economics, Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Allan Timmermann: University of California, San Diego and CREATES, Postal: University of California, San Diego, Rady School of Management, 4S146 Otterson Hall, MC 0553, 9500 Gilman Drive, La Jolla, CA 92093-0553

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We present a new approach to selecting active mutual funds that uses both portfolio holdings and fund return information to eliminate funds with predicted inferior performance through a sequence of pairwise fund comparisons. Our methodology determines both the number of skilled funds and their identities; funds identified as being superior earn substantially higher riskadjusted returns than top funds identified by conventional alpha ranking methods. Importantly, we find strong evidence of time-series variation in the number of funds identified as superior, as well as fluctuations in the style and industry exposures of such funds over time and across different volatility states.

Keywords: Fund confidence set; Equity mutual funds; Risk-adjusted performance (search for similar items in EconPapers)
JEL-codes: G11 G17 G2 (search for similar items in EconPapers)
Pages: 60
Date: 2017-03-13
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Picking funds with confidence (2021)
Working Paper: Picking Funds with Confidence (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2017-13

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