Bootstrap analysis of mutual fund performance

Haitao Huang, Lei Jiang, Xuan Leng and Liang Peng

Journal of Econometrics, 2023, vol. 235, issue 1, 239-255

Abstract: We study bootstrap methods for fund performance evaluation. We first show that two prominent bootstrap tests have biased test sizes in a large cross-section with short time series and lack test power to detect skilled funds when a substantial number of unskilled funds are present. We then develop the theory for a valid bootstrap Hotelling’s T-squared test for zero alpha. We apply the proposed bootstrap test in a practical two-step procedure to identify skilled funds. Our empirical analysis finds that skilled funds are more engaged in active management and hold stocks with higher expected anomalous returns.

Keywords: Bootstrap; Edgeworth expansion; Hotelling’s T-squared test; Mutual fund performance (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:235:y:2023:i:1:p:239-255

DOI: 10.1016/j.jeconom.2022.03.011

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