Daily fund data and Sharpe's (1992) style methodology are used to evaluate the performance and forecasting skill of European mutual fund managers. Specifically, this study addresses the following question: do European fund managers add value to their investors by actively managing their portfolio's country exposure? To look into this issue, a methodology based on attribution returns is employed. An attribution return is defined as the difference between a fund's actual month t return and the return that would have been generated by the fund month t - 1 portfolio's country exposure. European fund managers, as a group, add value to their investors by managing their portfolio's country exposure as evidenced by a positive mean attribution return. Also, during the same sample period but based on the more traditional performance measure alpha, these funds outperform a regional benchmark and both measures are found to be positively correlated.
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