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Bootstrap analysis of mutual fund performance

Author

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  • Huang, Haitao
  • Jiang, Lei
  • Leng, Xuan
  • Peng, Liang

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.

Suggested Citation

  • Huang, Haitao & Jiang, Lei & Leng, Xuan & Peng, Liang, 2023. "Bootstrap analysis of mutual fund performance," Journal of Econometrics, Elsevier, vol. 235(1), pages 239-255.
    • Handle: RePEc:eee:econom:v:235:y:2023:i:1:p:239-255
    DOI: 10.1016/j.jeconom.2022.03.011
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