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How to Tell if a Money Manager Knows More?

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  • Sergey Iskoz
  • Jiang Wang
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    Abstract

    In this paper, we develop a methodology to identify money managers who have private information about future asset returns. The methodology does not rely on a specific risk model, such as the Sharpe ratio, CAPM, or APT. Instead, it relies on the observation that returns generated by managers with private information cannot be replicated by those without it. Using managers' trading records, we develop distribution-free tests that can identify such managers. We show that our approach is general with regard to the nature of private information the managers may have, and with regard to the trading strategies they may follow.

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    File URL: http://www.nber.org/papers/w9791.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9791.

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    Date of creation: Jun 2003
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    Handle: RePEc:nbr:nberwo:9791

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