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from-the-field-175x95px.jpgFROM THE FIELD: Robeco researchers publish many whitepapers based on their own empirical studies. But they also closely follow quantitative research done by others. Head of Quantitative Equities Research David Blitz comments on notable external papers.

From the field: Systematic underestimation of mutual fund alphas

09-03-2016 | Insight | David Blitz, PhD This study* argues that because mutual funds often disappear following poor performance, some funds disappear because of bad luck and not because their true alpha is low. A fund that disappears because of bad luck leaves behind in the records an alpha estimate that is too low.

Because no mechanism eliminates mutual funds that just happen to be lucky, the observed distribution of alphas paints a picture about the prevalence of skill among actively managed funds that is too pessimistic. This ‘reverse survivorship bias’ is estimated to result in an underestimation of the true alphas of actively managed funds by around 60 basis points per year.

* Linnainmaa (2013), “Reverse survivorship bias”, Journal of Finance 68(3), 789-813

David Blitz

David Blitz, PhD

Head Quantitative Equities Research

“Factor investing, aimed at systematically capturing the value, momentum, low-volatility and other premiums, holds the future.”

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David Blitz, PhD
Head Quantitative Equities Research


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