MEASURING PERFORMANCE OF MUTUAL FUND MANAGERS THROUGH PARAMETRIC AND NON-PARAMETRIC TESTING

Abstract

This paper analyses the performance of mutual fund managers during January 1995 to
June 2010. Using the single period performance measures, i.e., the parametric
measures, which are the three measures of skill: outperformance (Jensen's Alpha), the
selectivity skill (Treynor and Mazuy's Alpha) and the market timing skill (Treynor and
Mazuy's Beta 2), the empirical results illustrate no persistence in performance.
Therefore, it is shown that mutual fund managers did not exhibit the skills to consistently
outperform the market.
Furthermore, using the two period performance (persistence) analyses, i.e., the nonparametric
measures, which were the Cross Product Ratio, Z-Test and Chi-Square
statistic, the empirical results illustrate no persistence in performance and that mutual
fund managers did not exhibit the skills to consistently outperform the market before the
financial crisis (January 1995 to December 2006) and after the financial crisis
(January 2007 to June 2010).