Time-Varying Fund Manager Skill
Mutual fund managers can outperform the market by picking stocks or timing the market successfully. Previous work has estimated picking and timing skill, assuming that each manager is endowed with a fixed amount of each and found some evidence of picking skills and little evidence of timing skills among successful managers. This paper estimates skill separately in booms and recessions and finds that the extent to which managers focus on stock picking or market timing fluctuates with the state of the economy. Stock picking is more prevalent in booms, while market timing dominates in recessions. We use this finding to develop a new methodology for detecting managerial skill. The results suggest that some but not all managers have skill. We describe the characteristics of the skilled managers and show that skilled managers significantly outperform the market.
|Date of creation:||Nov 2011|
|Date of revision:|
|Publication status:||published as Time-Varying Fund Manager Skill, (with Stijn van Nieuwerburgh and Laura Veldkamp), 2014, Journal of Finance 69, forthcoming.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Marcin Kacperczyk & Stijn Van Nieuwerburgh & Laura Veldkamp, 2009. "Rational Attention Allocation Over the Business Cycle," NBER Working Papers 15450, National Bureau of Economic Research, Inc.
- Jennifer Huang & Clemens Sialm & Hanjiang Zhang, 2011.
"Risk Shifting and Mutual Fund Performance,"
Review of Financial Studies,
Society for Financial Studies, vol. 24(8), pages 2575-2616.
- Marcin Kacperczyk & Clemens Sialm & Lu Zheng, 2004.
"On the Industry Concentration of Actively Managed Equity Mutual Funds,"
NBER Working Papers
10770, National Bureau of Economic Research, Inc.
- Marcin Kacperczyk & Clemens Sialm & Lu Zheng, 2005. "On the Industry Concentration of Actively Managed Equity Mutual Funds," Journal of Finance, American Finance Association, vol. 60(4), pages 1983-2011, 08.
- Pastor, Lubos & Stambaugh, Robert F., 2002.
"Investing in equity mutual funds,"
Journal of Financial Economics,
Elsevier, vol. 63(3), pages 351-380, March.
- Glode, Vincent, 2011. "Why mutual funds "underperform"," Journal of Financial Economics, Elsevier, vol. 99(3), pages 546-559, March.
- Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
- Marcin Kacperczyk & Amit Seru, 2007. "Fund Manager Use of Public Information: New Evidence on Managerial Skills," Journal of Finance, American Finance Association, vol. 62(2), pages 485-528, 04.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17615. 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: ()
If references are entirely missing, you can add them using this form.