This paper addresses all these issues by measuring the impact of luck on mutual fund performance. Specifically, we use the False Discovery Rate (F DR) introduced by Benjamini and Hochberg (1995) in the statistical literature—the F DR measures the proportion of lucky funds among the significant funds. We extend this methodology by developing a new approach which allows us to separately compute the F DR among funds with significant positive estimated alphas (called hereafter the best funds) and funds with significant negative estimated alphas (called hereafter the worst funds). A main virtue of the F DR and these new measures is that they are very easy to.
