Measuring Managerial Skill in the Mutual Fund Industry
39 Pages Posted: 22 Jun 2012 Last revised: 10 Mar 2021
Date Written: June 2012
Using the dollar-value a mutual fund manager adds as the measure of skill, we find that not only does skill exist (the average mutual fund manager adds about $2 million per year), but this skill is persistent, as far out as 10 years. We further document that investors recognize this skill and reward it by investing more capital with skilled managers. Higher skilled managers are paid more and there is a strong positive correlation between current managerial compensation and future performance.
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