Do (Some) University Endowments Earn Alpha?

Using data from 1991 to 2010, U.C. Davis Professors Brad Barber and Guojun Wang analyze educational endowment returns using simple style attribution models pioneered by Sharpe (1992). When they restrict the attribution model to public stock and US bond benchmarks the authors find that the average endowment earns an alpha close to zero, that the public stock/bond benchmarks explain 99 percent of the time-series variation in the return of the average endowment, and that the attribution model yields sensible estimates of the typical stock bond allocations (roughly 60 percent stock and 40 percent bonds).