Correction

This article refers to:

Buffett’s Alpha

When “Buffett's Alpha” (Fourth Quarter 2018), by Andrea Frazzini, David Kabiller, CFA, and Lasse Heje Pedersen, was originally published online and in print, Table 1 contained an error. Table 1, Panel B, should have presented the sample distribution of information ratios but instead presented a repeat of the data in Panel A. The correct Table 1 follows:

Table 1. Buffett’s Performance Relative to All Other Stocks and Mutual Funds, 1976–2017

	A. Sample Distribution of Sharpe Ratios						Buffett Performance
Stock/Fund Measure	Number of Stocks/Funds	Median	95th Percentile	99th Percentile	Maximum		Rank	Percentile
Sharpe ratio of equity mutual funds
All funds in CRSP data	4,585	0.36	0.69	1.10	3.20		137	97.0%
All funds alive in 1976 and 2017	133	0.36	0.54	0.63	0.79		1	100.0%
All funds alive in 1976 with at least 10-year history	304	0.30	0.49	0.61	0.79		1	100.0%
All funds with at least 10-year history	2,872	0.39	0.62	0.74	0.99		11	99.7%
All funds with at least 30-year history	432	0.38	0.59	0.73	0.93		3	99.5%
All funds with at least 40-year history	186	0.33	0.52	0.63	0.79		1	100.0%
Sharpe ratio of common stocks
All stocks in CRSP data	23,257	0.21	0.88	1.47	2.68		1,454	93.8%
All stocks alive in 1976 and 2017	504	0.36	0.51	0.57	0.79		1	100.0%
All stocks alive in 1976 with at least 10-year history	3,774	0.28	0.51	0.62	0.89		8	99.8%
All stocks with at least 10-year history	9,523	0.28	0.57	0.75	1.12		57	99.4%
All stocks with at least 30-year history	2,021	0.32	0.52	0.61	0.81		2	100.0%
All stocks with at least 40-year history	1,111	0.34	0.50	0.55	0.79		1	100.0%
	B. Sample Distribution of Information Ratios						Buffett Performance
Stock/Fund Measure	Number of Stocks/Funds	Median	95th Percentile	99th Percentile	Maximum		Rank	Percentile
Information ratio of equity mutual funds
All funds in CRSP data	4,585	-0.11	0.44	0.78	2.79		83	98.2%
All funds alive in 1976 and 2017	133	0.03	0.40	0.49	0.64		1	100.0%
All funds alive in 1976 with at least 10-year history	304	-0.05	0.34	0.48	0.64		1	100.0%
All funds with at least 10-year history	2,872	-0.05	0.39	0.61	0.89		20	99.3%
All funds with at least 30-year history	432	-0.01	0.35	0.49	0.78		3	99.5%
All funds with at least 40-year history	186	-0.01	0.39	0.49	0.64		1	100.0%
Information ratio of common stocks
All stocks in CRSP data	23,257	0.08	0.76	1.39	3.04		1,655	92.9%
All stocks alive in 1976 and 2017	504	0.18	0.37	0.43	0.64		1	100.0%
All stocks alive in 1976 with at least 10-year history	3,774	0.14	0.43	0.58	0.81		17	99.6%
All stocks with at least 10-year history	9,523	0.13	0.45	0.60	1.03		70	99.3%
All stocks with at least 30-year history	2,021	0.13	0.35	0.45	0.64		1	100.0%
All stocks with at least 40-year history	1,111	0.13	0.33	0.42	0.64		1	100.0%

Notes: The information ratio is defined as the intercept in a regression of monthly excess returns on the excess return of the value-weighted market portfolio, divided by the standard deviation of the residuals. Sharpe ratios and information ratios are annualized.