False discoveries and luck in the brazilian equity fund market.

Abstract

In this study the performance of equity funds in Brazil between January 2001 and January 2021 is assessed. The False Discovery Rate methodology is applied to the entire sample, as well as to sub-samples differentiating bank-affiliated funds from those unaffiliated. The results suggest that some managers are able to generate positive alphas after controlling for luck and that bankaffiliated funds achieve positive (negative) alphas less (more) frequently. The results also show that the location of alphas in the cross-sectional distribution differs across the sub-samples, with important academic and practical implications. Lastly, there is evidence that positive and negative performance persist, and that bank-unaffiliated funds are responsible for such phenomenon.