The outperformance probability of mutual funds
Publication date
2019
Document type
Research article
Author
Huber, Ferdinand
Organisational unit
Series or journal
Journal of risk and financial management
Periodical volume
12
Periodical issue
3/108 (Sep.)
First page
1
Last page
29
Peer-reviewed
✅
Part of the university bibliography
✅
Abstract
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.
Cite as
Enthalten in: Journal of risk and financial management. - Basel : MDPI, 2008. - Online-Ressource. - Bd. 12.2019, 3/108 (Sep.), Seite 1-29
Version
Not applicable (or unknown)
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Metadata only access