Measuring investment skills of fund managers
This article concerns the measurement of the investment skills of fund managers. A method is proposed that allows for a measurement and comparison of fund managers' performance across time and asset portfolios. The measure, the 'Excess Sharpe Ratio' (ESR) involves the construction of an appropriate benchmark for each fund manager, and then computing the difference between the Sharpe ratio of the manager and that of the benchmark. This procedure allows for a consistent measure of a manager's investment performance with respect to the relevant asset classes that the manager can invest in at any point in time. Using this measure, it is possible to detect significant persistence of managerial skills of up to 11 years. Also, new light is shed on the relationship of expenses to gross returns-even though firms with higher expenses have higher average gross returns, they in fact achieve this through higher risk-taking. Therefore, their ESR scores and Sharpe ratios are lower than firms with lower expenses.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 17 (2007)
Issue (Month): 16 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAFE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAFE20|
When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:17:y:2007:i:16:p:1359-1368. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.