Judging Fund Managers by the Company They Keep

Randolph Cohen, Joshua Coval and Lubos Pastor

No 9359, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a performance evaluation approach in which a fund manager's skill is judged by the extent to which his investment decisions resemble the decisions of managers with distinguished performance records. The proposed performance measures are estimated more precisely than standard measures, because they use historical returns and holdings of many funds to evaluate the performance of a single fund. According to one of our measures, funds with significantly positive ability considerably outnumber funds with significantly negative ability at the end of our sample. Simulations demonstrate that our measures are particularly useful in ranking managers. In an application that relies on such ranking, we find only weak persistence in the performance of U.S. equity funds after accounting for momentum in stock returns.

JEL-codes: G1 (search for similar items in EconPapers)
Date: 2002-12
New Economics Papers: this item is included in nep-cfn
Note: AP
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Citations: View citations in EconPapers (3)

Published as Randolph B. Cohen & Joshua D. Coval & Lubos Pástor, 2005. "Judging Fund Managers by the Company They Keep," Journal of Finance, American Finance Association, vol. 60(3), pages 1057-1096, 06.

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Journal Article: Judging Fund Managers by the Company They Keep (2005)
Working Paper: Judging Fund Managers by the Company They Keep (2003)
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