We test whether fund managers have stock-picking skill by comparing their holdings and trades prior to earnings announcements with the returns realized at those events. This approach largely avoids the joint-hypothesis problem with long-horizon studies of fund performance. Consistent with skilled trading, we find that, on average, stocks that funds buy earn significantly higher returns at subsequent earnings announcements than stocks that they sell. Funds display persistence in our event return-based metrics, and those that do well tend to have a growth objective, large size, high turnover, and use incentive fees to motivate managers.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
10685.
Length: Date of creation: Aug 2004 Date of revision: Handle: RePEc:nbr:nberwo:10685
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Marcin Kacperczyk & Clemens Sialm & Lu Zheng, 2008.
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