Managerial ability premium factor and fund performance

Feng Dong and John A. Doukas

Journal of International Money and Finance, 2021, vol. 113, issue C

Abstract: We examine whether fund managers use corporate managerial ability (MA) as a point of reference in their portfolio investment decisions and find that skilled fund managers with significant loading on high-MA stocks outperform low-skill managers with low-loading on high-MA stocks by about 6% annually based on FFC 4-factor alpha over the 1990–2017 period. Consistent with our managerial ability premium (MAP) hypothesis we find negative MAP betas for high-selectivity funds (i.e., safer-funds with high exposure on High-MA stocks) and positive MAP betas for low-selectivity funds (i.e., funds with high exposure on Low-MA stocks). The implication of our findings is that the MAP has emerged as a new factor that has been overlooked in prior asset pricing studies.

Keywords: MAP factor; Fund management skill; Corporate managerial ability; Mutual fund performance (search for similar items in EconPapers)
JEL-codes: G11 G14 G23 G32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:113:y:2021:i:c:s0261560621000024

DOI: 10.1016/j.jimonfin.2021.102353

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