Judging fund managers by the company they keep
By: Randolph Cohen, Joshua Coval, Lobus̆ Pástor
Contributors: Coval, Joshua; Pástor, Lubos̆; Harvard Business School. Division of Research
Series: Working paper / Division of Research, Harvard Business School -- 04-023; Working paper (Harvard Business School. Division of Research) -- 04-023
Publisher: Division of Research, Harvard Business School
Published: 2003
Place of publication: Boston]
Language: eng
Number of pages: 44
Subjects: Investments; Financial services industry; Mutual funds
Description: We develop a performance evaluation approach in which a fund manager's skill is judged by the extent to which his investment decisions resemble the decisions of managers with distinguished performance records. The proposed performance measures use historical returns and holding of many funds to evaluate the performance of a single fund. Simulations demonstrate that our measures are particularly useful in ranking managers. In an application that relies on such ranking, our measures reveal strong predictability in the returns of U.S. equity funds. Our measures provide information about future fund returns that is not contained in the standard measures.
Notes: Includes bibliographical references.