| Magazines |
Available online 14 May 2022 |
| Author | Haitao Huang, Lei Jiang, Xuan Leng, Liang Peng |
| Content | 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. |
| JEL-Codes | |
| Keywords | Bootstrap; Edgeworth expansion; Hotelling's; T-squared test; Mutual fund performance |
