Do Actively Managed US Mutual Funds Produce Positive Alpha?

Using more general forms of equilibrium asset pricing models, we re-examine the recentliterature on actively managed US Mutual Fund performance over the period 1984-2015. Using the false discovery technique, we show that the existing literature which isbased upon unconditional versions of these models have underestimated performance ofactively managed US funds because they produce inconsistent estimates of fund alphacoefficients. Our estimations of abnormal returns using conditional models allow theparameters that underlie the equilibrium asset pricing models to change which producesconsistent estimates of funds alphas. We find that when returns are measured net ofmanagement and trading costs between 2.9% to 8.4% of US actively managed fundsprovide positive-alpha. This contrasts with existing studies that find no significantpercentage of US Mutual Funds produce positive-alpha. We also find that differentinvestment styles have significantly different percentages of positive-alpha funds