Where Does Skill Hide? : A Fee Segmented Bootstrap Approach of Swedish Mutual Funds

Sammanfattning

This thesis examines whether actively managed Swedish equity mutual funds generate abnormal returns attributable to genuine managerial skill rather than luck, and whether such skill varies across fee levels. In particular, the study investigates whether high-fee or low-fee funds exhibit stronger evidence of skill and whether any detected outperformance is economically meaningful for investors after costs. The empirical analysis estimates risk-adjusted abnormal returns using asset pricing models and applies bootstrap simulations under the null hypothesis of no managerial skill. This approach determines whether extreme right-tail performance outcomes are statistically distinguishable from random variation. Funds are divided into high-fee and low-fee segments based on Total Expense Ratios (TER), and performance is further evaluated using Economic Value Added (EVA). The results suggest that managerial skill is concentrated in a small subset of funds. High-fee funds show some evidence of stronger gross performance; however, these advantages are largely offset by fees. The EVA results further indicate that high-fee funds are more frequently represented within the upper tail of the value-added distribution, despite negative average value added across funds. Overall, the findings suggest that genuine skill exists, but is limited, unevenly distributed, and sensitive to model specification.