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Time-Varying Fund Manager Skill

Author

Listed:
  • MARCIN KACPERCZYK
  • STIJN VAN NIEUWERBURGH
  • LAURA VELDKAMP

Abstract

type="main"> We propose a new definition of skill as general cognitive ability to pick stocks or time the market. We find evidence for stock picking in booms and market timing in recessions. Moreover, the same fund managers that pick stocks well in expansions also time the market well in recessions. These fund managers significantly outperform other funds and passive benchmarks. Our results suggest a new measure of managerial ability that weighs a fund's market timing more in recessions and stock picking more in booms. The measure displays more persistence than either market timing or stock picking alone and predicts fund performance.

Suggested Citation

  • Marcin Kacperczyk & Stijn Van Nieuwerburgh & Laura Veldkamp, 2014. "Time-Varying Fund Manager Skill," Journal of Finance, American Finance Association, vol. 69(4), pages 1455-1484, August.
    • Handle: RePEc:bla:jfinan:v:69:y:2014:i:4:p:1455-1484
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    File URL: http://hdl.handle.net/10.1111/jofi.12084
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    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G2 - Financial Economics - - Financial Institutions and Services

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