False (and Missed) Discoveries in Financial Economics

• 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; Purdue University System; Purdue University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12951
• 发表日期: 2020
• 页码: 2503-2553
• 关键词: MUTUAL FUND PERFORMANCE; Hedge funds; SURVIVORSHIP BIAS; cross-section; luck; MARKET; skill; time; persistence; bootstrap

摘要

Multiple testing plagues many important questions in finance such as fund and factor selection. We propose a new way to calibrate both Type I and Type II errors. Next, using a double-bootstrap method, we establish at-statistic hurdle that is associated with a specific false discovery rate (e.g., 5%). We also establish a hurdle that is associated with a certain acceptable ratio of misses to false discoveries (Type II error scaled by Type I error), which effectively allows for differential costs of the two types of mistakes. Evaluating current methods, we find that they lack power to detect outperforming managers.