An Assessment of Managerial Skill Based on Cross-Sectional Mutual Fund Performance
67 Pages Posted: 15 May 2017
Date Written: March 29, 2017
Using individual managers (instead of funds) as observational units, we provide new evidence of significant cross-sectional performance persistence in mutual funds by comparing the performance of the same manager across multiple contemporaneously-managed funds. Our approach more robustly rules out luck as an explanation of performance differences. We demonstrate the importance of our approach by showing that a significant number of outperforming funds have managers who contemporaneously manage underperforming funds. We provide new evidence on managerial busyness by showing that manager performance drops significantly when the number of funds they manage increases, especially when these multiple funds have disparate objectives.
Keywords: Mutual Funds, Mutual Fund Performance, Portfolio Management, Fund Manager Performance, Cross-Sectional Performance, Performance Persistence, Skill versus Luck
JEL Classification: G11, G14, G23
Suggested Citation: Suggested Citation