Picking Funds with Confidence

Niels Strange Grønborg; Asger Lunde; Allan Timmermann; Russ Wermers

doi:10.1016/j.jfineco.2020.07.003

Picking Funds with Confidence

Niels Strange Grønborg, Asger Lunde, Allan Timmermann^*, Russ Wermers

^*Corresponding author for this work

Department of Economics and Business Economics - CREATES

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaper › Journal article › Research › peer-review

7 Citations (Scopus)

Abstract

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 language	English
Journal	Journal of Financial Economics
Volume	139
Issue	1
Pages (from-to)	1-28
Number of pages	28
ISSN	0304-405X
DOIs	https://doi.org/10.1016/j.jfineco.2020.07.003
Publication status	Published - Jan 2021

Keywords

Equity mutual funds
Fund confidence set
Risk-adjusted performance

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Picking Funds with Confidence

Abstract

Keywords

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