Workplace Fund Performance: Luck or Skill?

Abstract

In this paper we examine whether Parnassus Workplace fund delivers superior return despite it restrictive screening based on workplace environment. We use bootstrap method to evaluate the financial performance of the fund. This bootstrap allows us to distinguish skill from luck. The distribution of the actual t(α) and the simulated t(α) are compared to infer whether the actual distribution is generated by mere luck or whether some manager exhibits skill. Our results indicate that the fund exhibits stock selection skills. The t-statistic of the actual estimated alpha is more extreme than the simulated t-statistic of alpha and as such the fund exhibits skill. The fact that PARWX beats the simulations does suggest that by picking the right funds, investors can outperform the market.