Machine learning and fund characteristics help to select mutual funds with positive alpha

• 成果类型: Article
• 署名作者: De Miguel, Victor; Gil-Bazo, Javier; Nogales, Francisco J.; Santos, Andre A. P.
• 署名单位: University of London; London Business School; Pompeu Fabra University; Barcelona School of Economics; Universidad Carlos III de Madrid; CUNEF Universidad
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2023.103737
• 发表日期: 2023
• 关键词: Active asset management; Mutual-fund performance; Mutual-fund misallocation; Machine Learning; Tradable strategies; Nonlinearities and interactions

摘要

Machine-learning methods exploit fund characteristics to select tradable long-only portfolios of mutual funds that earn significant out-of-sample annual alphas of 2.4% net of all costs. The methods unveil interactions in the relation between fund characteristics and future performance. For instance, past performance is a particularly strong predictor of future performance for more active funds. Machine learning identifies managers whose skill is not sufficiently offset by diseconomies of scale, consistent with informational frictions preventing investors from identifying the outperforming funds. Our findings demonstrate that investors can benefit from active management, but only if they have access to sophisticated prediction methods.