Learning by Doing: The Value of Experience and the Origins of Skill for Mutual Fund Managers

39 Pages Posted: 6 Aug 2012 Last revised: 31 Mar 2017

See all articles by Elisabeth Kempf

Elisabeth Kempf

University of Chicago - Booth School of Business; Centre for Economic Policy Research (CEPR)

Alberto Manconi

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Oliver G. Spalt

University of Mannheim - Business School; European Corporate Governance Institute (ECGI)

Date Written: March 30, 2017

Abstract

Learning by doing matters for professional investors. We develop a new methodology to show that mutual fund managers outperform in industries where they have obtained experience on the job. The key to our identification strategy is that we look "inside'' funds and exploit heterogeneity in experience for the same manager at a given point in time across industries. As fund managers become more experienced, they pick better stocks, and their trades become better predictors for abnormal stock returns around subsequent earnings announcements. Our approach identifies experience as a first-order driver of observed mutual fund manager skill.

Keywords: Learning, Learning-by-Doing, Mutual Funds, Stock-Picking

JEL Classification: G23, D83, J24

Suggested Citation

Kempf, Elisabeth and Manconi, Alberto and Spalt, Oliver G., Learning by Doing: The Value of Experience and the Origins of Skill for Mutual Fund Managers (March 30, 2017). Available at SSRN: https://ssrn.com/abstract=2124896 or http://dx.doi.org/10.2139/ssrn.2124896

Elisabeth Kempf

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://www.chicagobooth.edu/faculty/directory/k/elisabeth-kempf

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Alberto Manconi

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://mypage.unibocconi.eu/albertomanconi/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Oliver G. Spalt (Contact Author)

University of Mannheim - Business School ( email )

L5, 5
Mannheim, 68131
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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