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Detecting Superior Mutual Fund Managers: Evidence from Copycats

Review of Asset Pricing Studies, Forthcoming

52 Pages Posted: 19 Sep 2014 Last revised: 22 Dec 2014

Blake Phillips

University of Waterloo

Kuntara Pukthuanthong

University of Missouri, Columbia

P. Raghavendra Rau

University of Cambridge

Date Written: September 15, 2014

Abstract

We examine the ex ante ability of investors to identify superior mutual fund managers among the investor set likely most able, and with the greatest incentive to do so, their rivals. Identifying actual copycat funds via comparisons of trading in consecutive periods, we find little evidence to suggest that managers are able to detect superior funds. Copycats select funds with high prior performance and investment inflows, and the performance of the target fund reverses following copying initiation. If superior managers exist, our results suggest that the source of skill lies in private information obtained by these managers. These results are consistent with information models indicating that private, but not public, information can be profitable.

Keywords: copycats, mutual fund, skill, performance

JEL Classification: G02, G23

Suggested Citation

Phillips, Blake and Pukthuanthong, Kuntara and Rau, P. Raghavendra, Detecting Superior Mutual Fund Managers: Evidence from Copycats (September 15, 2014). Review of Asset Pricing Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2496452 or http://dx.doi.org/10.2139/ssrn.2496452

Blake Phillips

University of Waterloo ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada

Kuntara Pukthuanthong (Contact Author)

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

P. Raghavendra Rau

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

HOME PAGE: http://www.raghurau.com/

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