Critical Finance Review > Vol 10 > Issue 2

Can Mutual Fund Stars Still Pick Stocks?: A Replication and Extension of Kosowski, Timmermann, Wermers, and White (2006)

Timothy B. Riley, Sam M. Walton College of Business, University of Arkansas, USA, TRiley@walton.uark.edu
 
Suggested Citation
Timothy B. Riley (2021), "Can Mutual Fund Stars Still Pick Stocks?: A Replication and Extension of Kosowski, Timmermann, Wermers, and White (2006)", Critical Finance Review: Vol. 10: No. 2, pp 251-261. http://dx.doi.org/10.1561/104.00000102

Publication Date: 24 Jun 2021
© 2021 Timothy B. Riley
 
Subjects
 
Keywords
G00G11G14G20
Mutual fundSkillAlphaBootstrapLuck
 

Share

Download article
In this article:
1. Methods 
2. Data 
3. Results 
4. Conclusions 
References 

Abstract

Kosowski et al. (2006) use a novel bootstrap technique to study the performance of domestic equity mutual funds over the period 1975 to 2002. They find that “a sizable minority of managers pick stocks well enough to more than cover their costs.” When replicating their analysis during their period of study, I find results similar to theirs. However, if I perform an identical analysis over the period 2003 to 2017, I find no evidence of stock selection ability in excess of costs. Furthermore, the combined 1975 to 2017 period indicates that the alphas of the best funds likely occur solely due to luck.

DOI:10.1561/104.00000102