However, part of this increase can be due to the inclusion of new lucky funds. As a consequence, the standard approach does not provide guidance on the location of funds with differential performance in the tails of the cross-sectional alpha distribution. For instance, suppose that the number of funds with negative estimated alphas increases by 50 as γ passes from to . If all these 50 funds are lucky, we would conclude that the few funds with negative performance are located in the extreme left tail. On the contrary, if none of them is lucky, we would say that the funds with negative performance are more.
