The Review of Asset Pricing Studies Vol. 11 No. 1 2021

Double-Adjusted Mutual Fund Performance

Jeffrey A. Busse¹; Lei Jiang²; Yuehua Tang³

¹ Goizueta Business School, Emory University · ² School of Economics and Management, Tsinghua University · ³ Warrington College of Business, University of Florida ,

Abstract

Mutual fund returns are significantly related to stock characteristics in the cross-section after controlling for risk via factor models. We develop a new double-adjusted approach that controls for both factor model betas and stock characteristics in one performance measure. The new measure substantially affects performance rankings, with a quarter of funds experiencing a change in their percentile ranking greater than 10. Double-adjusted performance produces strong evidence of persistence in relative performance. Inference based on the new measure often differs, sometimes dramatically, from that based on traditional performance estimates. Received November 22, 2019; editorial decision June 28, 2020; Editor: Jeffrey Pontiff.

DOI

10.1093/rapstu/raaa011

Volume

11

Issue

1

Pages

169-208

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

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