Review of Financial Studies Vol. 26 No. 3 2013
Mutual Fund's R 2 as Predictor of Performance
Abstract
[We propose that fund performance can be predicted by its R 2 , obtained from a regression of its returns on a multifactor benchmark model. Lower R 2 indicates greater selectivity, and it significantly predicts better performance. Stock funds sorted into lowest-quintile lagged R 2 and highest-quintile lagged alpha produce significant annual alpha of 3.8%. Across funds, R 2 is positively associated with fund size and negatively associated with its expenses and manager's tenure.]
- Volume
- 26
- Issue
- 3
- Pages
- 667-694
- Sources
- bibtex:phds-export.bib