Fund Manager Use of Public Information: New Evidence on Managerial Skills

58 Pages Posted: 13 Dec 2004

See all articles by Marcin T. Kacperczyk

Marcin T. Kacperczyk

Imperial College London - Accounting, Finance, and Macroeconomics; Centre for Economic Policy Research (CEPR)

Amit Seru

Stanford University

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We propose a simple model that relates skills of a fund manager to his reliance on public information -- the main implication being that the sensitivity of a manager's holdings to changes in public information decreases in his skill level. We estimate this sensitivity (RPI) as the R^2 of the regression of changes in a manager's portfolio holdings on changes in analysts' past recommendations using a large panel of U.S. equity funds for the period 1993 to 2002. Consistent with RPI containing information related to managerial skills, we find a strong inverse relationship between RPI and various existing measures of performance. These findings strengthen the interpretation of traditional performance measures as indeed reflecting skills in that managers who produce high values of these measures also have low RPI. Besides, we find that RPI contains information on managerial skills that may not be precisely reflected in traditional performance measures since flows from outside investors chase low-RPI funds, controlling for past fund performance. Our results are robust to different macro-economic variables, various information sets, information spillovers among stocks in the fund's portfolio, fund style, fund size, and fund turnover. In contrast to existing studies, we also document a significant role of manager-specific attributes in explaining performance.

Keywords: Managerial skill, public information, mutual funds, stock analysts

JEL Classification: G14, G23

Suggested Citation

Kacperczyk, Marcin T. and Seru, Amit, Fund Manager Use of Public Information: New Evidence on Managerial Skills. Sauder School of Business Working Paper, Available at SSRN: or

Marcin T. Kacperczyk (Contact Author)

Imperial College London - Accounting, Finance, and Macroeconomics ( email )

South Kensington campus
London SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Amit Seru

Stanford University ( email )

Stanford, CA 94305
United States

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