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Active Strategies, Randomness and Ability in Investment Fund’s Performance Evaluation: a Behavioral Approach

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  • Sílvia Bou Ysàs

    (Universitat Autònoma de Barcelona)

  • Magda Cayón Costa

    (Universitat Autònoma de Barcelona)

Abstract

This paper follows one main purpose: approaching classical models from a behavioral point of view. And two secondary objectives: First, providing behaviorally based tools to study efficiency in investment funds markets. Second, proposing a new methodological approach in order to disentangle randomness from ability in investment fund’s performance. We reach two main theoretical proposals: To set the fourth order moment of our Sharpe’s ratio differences based indicator as a market efficiency measure. To take the statistical comparison of the probability distribution of the fund’s Net selectivity with a N (0, σ p ) distribution, as an indicator of luck/skill in investment funds performance measurement. In order to illustrate these proposals, we take a randomly chosen sample of investment funds investing in four sectors: energy, financial, industrial and technology. We analyze: First, the cross sectional level of activity/efficiency in the market. And second, whether the individual results of each fund are ability or randomness caused.

Suggested Citation

  • Sílvia Bou Ysàs & Magda Cayón Costa, 2013. "Active Strategies, Randomness and Ability in Investment Fund’s Performance Evaluation: a Behavioral Approach," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 3(2), pages 1-5, April.
    • Handle: RePEc:spp:jkmeit:1361
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    References listed on IDEAS

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    1. Walter Briec & Kristiaan Kerstens & Octave Jokung, 2007. "Mean-Variance-Skewness Portfolio Performance Gauging: A General Shortage Function and Dual Approach," Management Science, INFORMS, vol. 53(1), pages 135-149, January.
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    3. Fama, Eugene F, 1972. "Components of Investment Performance," Journal of Finance, American Finance Association, vol. 27(3), pages 551-567, June.
    4. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
    5. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
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