Targeting Targets

60 Pages Posted: 4 Jan 2019 Last revised: 10 Jan 2019

See all articles by Naveen D. Daniel

Naveen D. Daniel

Drexel University - Department of Finance

Daniel Dorn

Drexel University - Department of Finance

David Pedersen

Rutgers School of Business-Camden

Date Written: January 8, 2019

Abstract

Investing in M&A targets before they receive offers yields high returns on the announcement day. Ours is the first paper to document targeting ability, which is the ability of fund managers to persistently generate such returns in excess of the returns their benchmarks earn from holding targets. Targeting ability translates one-for-one into mutual fund alpha. Targeting ability is not due to investment bank or management connections, not due to overweighting small stocks, and not due to long-term holdings that happen to become targets. Targeting ability arises from managers holding more targets, investing more capital in targets, and selecting higher-premium targets.

Keywords: Portfolio management, mutual fund performance, stock-picking ability, managerial skill

JEL Classification: G14, G23

Suggested Citation

Daniel, Naveen D. and Dorn, Daniel and Pedersen, David, Targeting Targets (January 8, 2019). Available at SSRN: https://ssrn.com/abstract=3304296 or http://dx.doi.org/10.2139/ssrn.3304296

Naveen D. Daniel

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215-895-5858 (Phone)
215-895-2955 (Fax)

HOME PAGE: http://lebow.drexel.edu/Faculty/DanielN

Daniel Dorn

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States

David Pedersen (Contact Author)

Rutgers School of Business-Camden ( email )

227 Penn Street
Camden, NJ 08102
United States

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