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Time-Varying Fund Manager Skill

60 Pages Posted: 16 Nov 2011 Last revised: 6 Dec 2012

Marcin T. Kacperczyk

Imperial College London - Accounting, Finance, and Macroeconomics; National Bureau of Economic Research (NBER)

Stijn Van Nieuwerburgh

New York University Stern School of Business, Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Laura Veldkamp

New York University - Stern School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 4 versions of this paper

Date Written: December 5, 2012

Abstract

We propose a new definition of skill as a general cognitive ability to either pick stocks or time the market at different times. We find evidence for stock picking in booms and for 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 gives more weight to a fund’s market timing in recessions and to a fund’s stock picking in booms. The measure displays far more persistence than either market timing or stock picking alone and can predict fund performance.

Keywords: mutual funds, skills, business cycle

JEL Classification: G12, G14, G23

Suggested Citation

Kacperczyk, Marcin T. and Van Nieuwerburgh, Stijn and Veldkamp, Laura, Time-Varying Fund Manager Skill (December 5, 2012). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1959902 or http://dx.doi.org/10.2139/ssrn.1959902

Marcin Kacperczyk (Contact Author)

Imperial College London - Accounting, Finance, and Macroeconomics ( email )

South Kensington campus
London SW7 2AZ
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Stijn Van Nieuwerburgh

New York University Stern School of Business, Department of Finance ( email )

44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Laura Veldkamp

New York University - Stern School of Business ( email )

44 West 4th St. - Suite 7-180
New York, NY 100012
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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