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Old 08-02-2018, 04:49 PM
Kenny's Avatar
Kenny Kenny is offline
Join Date: Jan 2003
Posts: 7,865
Default Testing manager performance i.e. comparing two samples

I have (for example) a data set of annual investment returns over a period of 10 years for 100 investment managers. They are ranked in some manner from 1 - 100. I think that managers ranked from 11-20 achieve better returns on average than managers ranked from 81-90 so I want to run a statistical analysis comparing these 2 groups, but I am not completely clear on the proper way to test this hypothesis.

I am looking at using a t test comparing the means of the 2 samples where the variance of the populations are assumed to be equal. Should I be running this test using:

1) average annual returns of each group over the 10 year period such each sample has 10 observations

2) actual returns of each manager over the 10 year period such that each sample has 100 observations

3) actual returns of each manager in a given year and aggregate the results across time somehow

4) ?

What if ranking is based on assets under management? Given that over a 10 year period the groupings may change slightly does that impact the way in which the analysis should be performed?
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