Cross-sectional alpha dispersion and performance evaluation

• 成果类型: Article
• 署名作者: Harvey, Campbell R.; Liu, Yan
• 署名单位: Duke University; National Bureau of Economic Research; Texas A&M University System; Texas A&M University College Station
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.04.005
• 发表日期: 2019
• 页码: 273-296
• 关键词: Alpha; Hedge funds; Mutual funds; Performance evaluation; Bayesian; Appraisal ratio; Flow-performance sensitivity; Flow-performance convexity; idiosyncratic risk; Performance ranks

摘要

Our paper explores the link between cross-sectional fund return dispersion and performance evaluation. The foundation of our model is the simple intuition that in periods of high return dispersion, which is associated with high levels of idiosyncratic risk for zero alpha funds, unskilled managers can more easily disguise themselves as skilled. Rational investors should be more skeptical and apply larger discounts to reported performance in high dispersion environments. Our empirical results are consistent with this prediction. Using fund flow data, we show that a one standard deviation increase in cross-sectional return dispersion is associated with an 11% to 17% decline in flow-performance sensitivity. The effect is stronger for recent data and among outperforming funds. (C)2019 Elsevier B.V. All rights reserved.