Long-term negative fund alpha: Is it caused by bad skill or bad luck?

Long-term negative fund alpha: Is it caused by bad skill or bad luck? 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Financial Markets and Portfolio Management Springer Journals

Long-term negative fund alpha: Is it caused by bad skill or bad luck?

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Publisher
Springer Journals
Copyright
Copyright © 2018 by Swiss Society for Financial Market Research
Subject
Business and Management; Business and Management, general; Finance, general; Management
ISSN
1934-4554
eISSN
2373-8529
D.O.I.
10.1007/s11408-017-0303-2
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

Financial Markets and Portfolio ManagementSpringer Journals

Published: Jan 19, 2018

References

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