How to Tell if a Money Manager Knows More?

Sergey Iskoz and Jiang Wang

No 9791, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we develop a methodology to identify money managers who have private information about future asset returns. The methodology does not rely on a specific risk model, such as the Sharpe ratio, CAPM, or APT. Instead, it relies on the observation that returns generated by managers with private information cannot be replicated by those without it. Using managers' trading records, we develop distribution-free tests that can identify such managers. We show that our approach is general with regard to the nature of private information the managers may have, and with regard to the trading strategies they may follow.

JEL-codes: G0 (search for similar items in EconPapers)
Date: 2003-06
New Economics Papers: this item is included in nep-cfn, nep-rmg and nep-sea
Note: AP
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