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 are estimated more precisely than standard measures, because they use historical returns and holdings of many funds to evaluate the performance of a single fund. According to one of our measures, funds with significantly positive ability considerably outnumber funds with significantly negative ability at the end of our sample. Simulations demonstrate that our measures are particularly useful in ranking managers. In an application that relies on such ranking, we find only weak persistence in the performance of U.S. equity funds after accounting for momentum in stock returns.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
9359.
Length: Date of creation: Dec 2002 Date of revision: Handle: RePEc:nbr:nberwo:9359
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Brown, Stephen J & Goetzmann, William N, 1995.
" Performance Persistence,"
Journal of Finance,
American Finance Association, vol. 50(2), pages 679-98, June.
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