Title: | The outperformance probability of mutual funds | Authors: | Frahm, Gabriel Huber, Ferdinand |
Language: | eng | Issue Date: | 2019 | Publisher: | MDPI | Document Type: | Article | Source: | Enthalten in: Journal of risk and financial management. - Basel : MDPI, 2008. - Online-Ressource. - Bd. 12.2019, 3/108 (Sep.), Seite 1-29 | Journal / Series / Working Paper (HSU): | Journal of risk and financial management | Volume: | 12 | Issue: | 3/108 (Sep.) | Page Start: | 1 | Page End: | 29 | Publisher Place: | Basel | 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. |
Organization Units (connected with the publication): | Angewandte Stochastik und Risikomanagement | URL: | https://www.mdpi.com/1911-8074/12/3/108/pdf | Verlags-DOI: | 10.3390/jrfm12030108 |
Appears in Collections: | 3 - Publication references (without fulltext) |
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