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Can Mutual Fund "Stars" Really Pick Stocks? New Evidence from a Bootstrap Analysis

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Listed author(s):
  • ROBERT KOSOWSKI
  • ALLAN TIMMERMANN
  • RUSS WERMERS
  • HAL WHITE

Abstract

We apply a new bootstrap statistical technique to examine the performance of the U.S. open-end, domestic equity mutual fund industry over the 1975 to 2002 period. A bootstrap approach is necessary because the cross section of mutual fund alphas has a complex nonnormal distribution due to heterogeneous risk-taking by funds as well as nonnormalities in individual fund alpha distributions. Our bootstrap approach uncovers findings that differ from many past studies. Specifically, we find that a sizable minority of managers pick stocks well enough to more than cover their costs. Moreover, the superior alphas of these managers "persist." Copyright 2006 by The American Finance Association.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6261.2006.01015.x
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Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 61 (2006)
Issue (Month): 6 (December)
Pages: 2551-2595

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Handle: RePEc:bla:jfinan:v:61:y:2006:i:6:p:2551-2595
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