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Can mutual fund “stars” really pick stocks? New evidence from a wild bootstrap analysis

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  • Hounyo, Ulrich
  • Lin, Jiahao

Abstract

This paper identifies the issue of “duplicate observations” in existing methods for analyzing mutual fund performance and proposes a solution using a novel wild bootstrap-based approach. Our proposed method preserves various characteristics of mutual fund databases, including entry/exit points for each fund (i.e., missing data) and cross-sectional information. We show that our proposed bootstrap tests have a near-optimal size and exhibit greater power compared to widely used standard bootstrap methods for evaluating mutual fund performance. Additionally, we present a new approach to picking the top-performing mutual funds. Our empirical results indicate that a measurable fraction of funds outperform the market.

Suggested Citation

  • Hounyo, Ulrich & Lin, Jiahao, 2026. "Can mutual fund “stars” really pick stocks? New evidence from a wild bootstrap analysis," Journal of Empirical Finance, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:empfin:v:85:y:2026:i:c:s0927539825000957
    DOI: 10.1016/j.jempfin.2025.101673
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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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