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Picking Funds with Confidence

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We present a new approach to selecting actively managed mutual funds that uses both portfolio holdings and fund return information to eliminate funds with predicted inferior performance through a sequence of pairwise fund comparisons. Our methodology determines both the number of skilled funds and their identities, and locates funds with substantially higher risk-adjusted returns than those identified by conventional alpha-ranking methods. We find strong evidence of time-series variation in both the number of funds identified as superior using our approach, as well as in their performance across different economic states.

Original languageEnglish
JournalJournal of Financial Economics
Volume139
Issue1
Pages (from-to)1-28
Number of pages28
ISSN0304-405X
DOIs
Publication statusPublished - Jan 2021

    Research areas

  • Equity mutual funds, Fund confidence set, Risk-adjusted performance

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