Are Active Norwegian Mutual Fund Managers Paid for Luck or Skill? : A New Approach to Distinguish Between Luck and Skill Among Active Norwegian Mutual Fund Managers

Abstract

This thesis investigates whether the performance of actively managed Norwegian mutual funds is due to luck or skill. First, we measure the performance on aggregate and individual levels using the Carhart (1997) four-factor model. We then turn to the bootstrappingprocedures, free from data snooping bias, proposed by Kosowski, Timmermann, White, and Wermers (2006), Fama and French (2010), and a new approach proposed by Harvey and Liu(2020) in evaluation of luck or skill among the Norwegian mutual fund managers. Through the data, free from survivorship bias, aggregate fund performance suggest no statistically significant evidence of abnormal risk-adjusted net-of-fees return. At the individual level we find both positive and negative statistically significant abnormal net-of-fees returns, risk-adjusted. Finally, there is no statistically significant evidence of skill amongst the Norwegian mutual fund managers. We do, however, find evidence of a lack of skill among the bottom performing managers.