How to Tell If a Money Manager Knows More?

50 Pages Posted: 23 Jun 2003

See all articles by Sergey Iskoz

Sergey Iskoz

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Jiang Wang

Massachusetts Institute of Technology (MIT) - Sloan School of Management; China Academy of Financial Research (CAFR); National Bureau of Economic Research (NBER)

Date Written: June 2003

Abstract

In this paper, we develop a methodology to identify money managers who have private information about future asset returns. The methodology does not rely on a specific risk model, such as the Sharpe ratio, CAPM, or APT. Instead, it relies on the observation that returns generated by managers with private information cannot be replicated by those without it. Using managers' trading records, we develop distribution-free tests that can identify such managers. We show that our approach is general with regard to the nature of private information the managers may have, and with regard to the trading strategies they may follow.

Suggested Citation

Iskoz, Sergey and Wang, Jiang, How to Tell If a Money Manager Knows More? (June 2003). NBER Working Paper No. w9791, Available at SSRN: https://ssrn.com/abstract=418293

Sergey Iskoz

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Jiang Wang (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E62-614
100 Main Street
Cambridge, MA 02142
United States
617-253-2632 (Phone)
617-258-6855 (Fax)

China Academy of Financial Research (CAFR)

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Shanghai P.R.China, 200030
China

National Bureau of Economic Research (NBER)

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United States

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