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An evaluation on the true statistical relevance of Jensen's alpha trough simulation: An application for Germany

Author

Listed:
  • Jorge Sainz

    (URJC)

  • Pilar Grau

    (URJC)

  • Luis Miguel Doncel

    (URJC)

  • Javier Otamendi

    (URJC)

Abstract

Mutual fund managers' ability to generate continuous positive value in excess to a relevant benchmark index is a crucial aspect for its evaluation. Focusing on the German market, in this research we apply several simulation methods that avoid statistical problems related to multiple hypothesis testing in traditional financial techniques. By doing so we obtain a threshold value that delimits what is considered the true null hypothesis. Our main result is that managers'' action are of little significance with only a small part of them adding excess value to mutual funds they run.

Suggested Citation

  • Jorge Sainz & Pilar Grau & Luis Miguel Doncel & Javier Otamendi, 2008. "An evaluation on the true statistical relevance of Jensen's alpha trough simulation: An application for Germany," Economics Bulletin, AccessEcon, vol. 7(10), pages 1-9.
    • Handle: RePEc:ebl:ecbull:eb-08n20001
    as

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    References listed on IDEAS

    as
    1. Pastor, Lubos & Stambaugh, Robert F., 2002. "Mutual fund performance and seemingly unrelated assets," Journal of Financial Economics, Elsevier, vol. 63(3), pages 315-349, March.
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    3. Dirk Nitzsche & Keith Cuthbertson & Niall O'Sullivan, 2005. "Mutual Fund Performance: Skill Or Luck?," Money Macro and Finance (MMF) Research Group Conference 2005 4, Money Macro and Finance Research Group.
    4. John D. Storey, 2002. "A direct approach to false discovery rates," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 64(3), pages 479-498, August.
    5. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
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    Cited by:

    1. Nik Tuzov & Frederi Viens, 2011. "Mutual fund performance: false discoveries, bias, and power," Annals of Finance, Springer, vol. 7(2), pages 137-169, May.

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    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • C0 - Mathematical and Quantitative Methods - - General

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