Can Mutual Fund Managers Pick Stocks? Evidence from the Trades Prior to Earnings Announcements

Malcolm Baker, Lubomir Litov, Jessica A. Wachter () and Jeffrey Wurgler ()

No 10685, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We test whether fund managers have stock-picking skill by comparing their holdings and trades prior to earnings announcements with the returns realized at those events. This approach largely avoids the joint-hypothesis problem with long-horizon studies of fund performance. Consistent with skilled trading, we find that, on average, stocks that funds buy earn significantly higher returns at subsequent earnings announcements than stocks that they sell. Funds display persistence in our event return-based metrics, and those that do well tend to have a growth objective, large size, high turnover, and use incentive fees to motivate managers.

JEL-codes: G2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-fin
Date: 2004-08
Note: CF AP
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w10685.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:10685

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10685
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().