Do actively managed US mutual funds produce positive alpha?

Rong Huang, Keith Pilbeam, William Pouliot

Research output: Contribution to journalArticlepeer-review

7 Citations (Scopus)
135 Downloads (Pure)

Abstract

Using more general forms of equilibrium asset pricing models, we re-examine the recent literature on actively managed US Mutual Fund performance over the period 1984–2015. Using the false discovery technique, we show that the existing literature which is based upon unconditional versions of these models have underestimated performance of actively managed US funds because they produce inconsistent estimates of fund alpha coefficients. Our estimations of abnormal returns using conditional models allow the parameters that underlie the equilibrium asset pricing models to change which produces consistent estimates of funds alphas. We find that when returns are measured net of management and trading costs between 2.9% to 8.4% of US actively managed funds produce positive-alpha. This contrasts with existing studies that find no significant percentage of US Mutual Funds produce positive-alpha. We also find that different investment styles have significantly different percentages of positive-alpha funds.

Original languageEnglish
Pages (from-to)472-492
Number of pages21
JournalJournal of Economic Behavior and Organization
Volume182
Early online date26 Apr 2019
DOIs
Publication statusPublished - Feb 2021

Keywords

  • Bootstrap
  • CUSUM Test
  • Capital asset pricing model
  • Mutual funds

ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management

Fingerprint

Dive into the research topics of 'Do actively managed US mutual funds produce positive alpha?'. Together they form a unique fingerprint.

Cite this