This paper examines the sources of long-term negative fund alpha. We compare the actual loser funds with a control group of bootstrapped loser funds. We find that the returns of the two fund groups are co-integrated, and that they are similar in market risk exposure, alpha consistency, portfolio holdings, and GARCH volatility. The test results show that long-term negative fund alpha occurs due to bad luck rather than to bad skill.
Financial Markets and Portfolio Management – Springer Journals
Published: Jan 19, 2018
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