The Varying (?) Quality of Investment Trust Management

Abstract

The paper compares year-to-year changes in the Wiesenberger Index of Return for investment funds of similar objectives. It is initially shown, using correlation techniques, that there was little consistency in yearly performance of the funds during the period from 1951 to 1960. This result serves as support for the assumption that a fund's relative performance in any one year is strictly a random occurrence. We might, therefore, define a “successful” management as one whose fund will be in the top half of funds with similar objectives with probability of at least .7. It is then shown, using a Bayesian approach, that only 28 funds out of a sample of 128 would have judged themselves superior at odds in excess of even money, with the given criterion.