Logo
Munich Personal RePEc Archive

Flaw in the fund skill/luck test method of Cuthbertson et al

Nuttall, John (2007): Flaw in the fund skill/luck test method of Cuthbertson et al.

[thumbnail of MPRA_paper_1584.pdf]
Preview
PDF
MPRA_paper_1584.pdf

Download (119kB) | Preview

Abstract

Cuthbertson et al have recently described a method that is claimed to be able to identify individual fund managers who exhibited skill over a long period in the past. The only input to the process is monthly fund returns. We suggest that a critical step in the Cuthbertson method is flawed. This step involves the study of the order statistics of period average fund returns. We construct a simple model to which the Cuthbertson method should apply. Simulations with the model conclusively demonstrate that the method fails to detect many funds with skill, and also erroneously identifies many funds as having skill they do not possess.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.