EconPapers    
Economics at your fingertips  
 

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

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

Journal of Financial and Quantitative Analysis, 2010, vol. 45, issue 5, 1111-1131

Abstract: Recent research finds that the stocks that mutual fund managers buy outperform the stocks that they sell (e.g., Chen, Jegadeesh, and Wermers (2000)). We study the nature of this stock-picking ability. We construct measures of trading skill based on how the stocks held and traded by fund managers perform at subsequent corporate earnings announcements. This approach increases the power to detect skilled trading and sheds light on its source. We find that the average fund’s recent buys significantly outperform its recent sells around the next earnings announcement, and that this accounts for a disproportionate fraction of the total abnormal returns to fund trades estimated in prior work. We find that mutual fund trades also forecast earnings surprises. We conclude that mutual fund managers are able to trade profitably in part because they are able to forecast earnings-related fundamentals.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (62) Track citations by RSS feed

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
Working Paper: Can Mutual Fund Managers Pick Stocks? Evidence from the Trades Prior to Earnings Announcements (2004) Downloads
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: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:45:y:2010:i:05:p:1111-1131_00

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Keith Waters ().

 
Page updated 2021-06-10
Handle: RePEc:cup:jfinqa:v:45:y:2010:i:05:p:1111-1131_00