Abstract

http://ssrn.com/abstract=1107511
 
 

References (126)



 
 

Citations (2)



 


 



When Active Fund Managers Deviate from Their Peers: Implications for Fund Performance


Swasti Gupta-Mukherjee


Loyola University Chicago - Department of Finance

August 1, 2012

AFA 2009 San Francisco Meetings Paper
Journal of Banking and Finance, Forthcoming

Abstract:     
This paper proposes that the extent to which mutual fund managers’ beliefs deviate from the ex ante unobservable representative beliefs of their peers contains information about their skill. A new measure based on portfolio allocations, "peer deviation", is used to capture a fund manager’s divergence from the contemporaneously unobservable beliefs of her peers. The portfolio based on representative beliefs of a group of managers investing in similar assets outperforms passive benchmarks, indicating that they reflect informed beliefs. Fund managers who simultaneously arrive at portfolio selections which, in hindsight, are close to those implied by representative beliefs possess ex ante more skill and exhibit future outperformance. Copycat strategies replicating lagged portfolio holdings implied by representative beliefs outperform the actual portfolio holdings of funds that deviate most, but the outperformance dissipates after two quarters.

Number of Pages in PDF File: 62

Keywords: mutual funds, performance evaluation, heterogeneous beliefs, networks

JEL Classification: G11, G14, G23, D83

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Date posted: March 26, 2008 ; Last revised: December 3, 2012

Suggested Citation

Gupta-Mukherjee, Swasti, When Active Fund Managers Deviate from Their Peers: Implications for Fund Performance (August 1, 2012). AFA 2009 San Francisco Meetings Paper ; Journal of Banking and Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1107511 or http://dx.doi.org/10.2139/ssrn.1107511

Contact Information

Swasti Gupta-Mukherjee (Contact Author)
Loyola University Chicago - Department of Finance ( email )
820 North Michigan Avenue
Chicago, IL 60611
United States
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