The Outperformance Probability of Mutual Funds
| Autor: | Ferdinand Huber, Gabriel Frahm |
|---|---|
| Rok vydání: | 2019 |
| Předmět: |
mutual funds
G19 050208 finance Computer science Sharpe ratio lcsh:Risk in industry. Risk management 05 social sciences Estimator outperformance probability performance measurement lcsh:HD61 exchange traded funds lcsh:Finance lcsh:HG1-9999 0502 economics and business ddc:330 inverse coefficient of variation Econometrics Performance measurement G11 050207 economics |
| Zdroj: | Journal of Risk and Financial Management, Vol 12, Iss 3, p 108 (2019) Journal of Risk and Financial Management Volume 12 Issue 3 |
| ISSN: | 1911-8074 |
| DOI: | 10.3390/jrfm12030108 |
| Popis: | We propose the outperformance probability as a new performance measure, which can be used in order to compare a strategy with a specified benchmark, and develop the basic statistical properties of its maximum-likelihood estimator in a Brownian-motion framework. The given results are used to investigate the question of whether mutual funds are able to beat the S& P 500 or the Russell 1000. Most mutual funds that are taken into consideration are, in fact, able to beat the market. We argue that one should refer to differential returns when comparing a strategy with a given benchmark and not compare both the strategy and the benchmark with the money-market account. This explains why mutual funds often appear to underperform the market, but this conclusion is fallacious. |
| Databáze: | OpenAIRE |
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