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Judging Fund Managers by the Company They Keep
Author(s) -
COHEN RANDOLPH B.,
COVAL JOSHUA D.,
PÁSTOR ĽUBOŠ
Publication year - 2005
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2005.00756.x
Subject(s) - manager of managers fund , investment management , predictability , ranking (information retrieval) , equity (law) , business , target date fund , closed end fund , finance , index fund , fund administration , investment fund , actuarial science , open end fund , computer science , institutional investor , corporate governance , statistics , market liquidity , political science , mathematics , machine learning , law
We develop a performance evaluation approach in which a fund manager's skill is judged by the extent to which the manager's investment decisions resemble the decisions of managers with distinguished performance records. The proposed performance measures use historical returns and holdings of many funds to evaluate the performance of a single fund. Simulations demonstrate that our measures are particularly useful in ranking managers. In an application that relies on such ranking, our measures reveal strong predictability in the returns of U.S. equity funds. Our measures provide information about future fund returns that is not contained in the standard measures.