Do actively managed US mutual funds produce positive Alpha?

Research output: Contribution to journalArticle


External organisations

  • University of Nottingham
  • City University London


Using more general forms of equilibrium asset pricing models, we re-examine the recent literature on actively managed US Mutual Fund performance over the period 1984–2015. Using the false discovery technique, we show that the existing literature which is based upon unconditional versions of these models have underestimated performance of actively managed US funds because they produce inconsistent estimates of fund alpha coefficients. Our estimations of abnormal returns using conditional models allow the parameters that underlie the equilibrium asset pricing models to change which produces consistent estimates of funds alphas. We find that when returns are measured net of management and trading costs between 2.9% to 8.4% of US actively managed funds produce positive-alpha. This contrasts with existing studies that find no significant percentage of US Mutual Funds produce positive-alpha. We also find that different investment styles have significantly different percentages of positive-alpha funds.


Original languageEnglish
JournalJournal of Economic Behavior and Organization
Early online date26 Apr 2019
Publication statusPublished - 26 Apr 2019


  • Bootstrap, CUSUM Test, Capital asset pricing model, Mutual funds