Abstract

http://ssrn.com/abstract=2038108
 
 

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Citations (10)



 


 



Measuring Skill in the Mutual Fund Industry


Jonathan Berk


Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Jules H. Van Binsbergen


University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

August 14, 2014


Abstract:     
Using the value that a mutual fund extracts from capital markets as the measure of skill, we find that the average mutual fund has used this skill to generate about $3.2 million per year. We document large cross-sectional differences in skill that persist for as long as 10 years. We further document that investors recognize this skill and reward it by investing more capital with better funds. Better funds earn higher aggregate fees, and there is a strong positive correlation between current compensation and future performance. The cross-sectional distribution of managerial skill is predominantly reflected in the cross-sectional distribution of fund size rather than gross alpha.

Number of Pages in PDF File: 44

Keywords: Mutual Funds, Skill, Compensation

JEL Classification: G2, J31

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Date posted: April 11, 2012 ; Last revised: September 5, 2014

Suggested Citation

Berk, Jonathan and van Binsbergen, Jules H., Measuring Skill in the Mutual Fund Industry (August 14, 2014). Available at SSRN: http://ssrn.com/abstract=2038108 or http://dx.doi.org/10.2139/ssrn.2038108

Contact Information

Jonathan B. Berk
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Jules H. Van Binsbergen (Contact Author)
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
HOME PAGE: http://www.nber.org/people/jules_vanbinsbergen
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