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

2010 ◽  
Vol 45 (5) ◽  
pp. 1111-1131 ◽  
Author(s):  
Malcolm Baker ◽  
Lubomir Litov ◽  
Jessica A. Wachter ◽  
Jeffrey Wurgler
Keyword(s):  
Mutual Fund ◽  
Earnings Announcements ◽  
Abnormal Returns ◽  
Prior Work ◽  
Mutual Fund Managers ◽  
Earnings Announcement ◽  
Fund Managers ◽  
Earnings Surprises ◽  
Corporate Earnings ◽  
Stock Picking

AbstractRecent 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.

scholarly journals Mutual Fund Managers’ Prior Work Experience and Their Investment Skill

2017 ◽  
Vol 47 (1) ◽  
pp. 3-24 ◽  
Author(s):  
Rui Chen ◽  
Zhennan Gao ◽  
Xueyong Zhang ◽  
Min Zhu
Keyword(s):  
Mutual Fund ◽  
Work Experience ◽  
Prior Work ◽  
Mutual Fund Managers ◽  
Fund Managers

scholarly journals Is It Who You Know or What You Know? Evidence from IPO Allocations and Mutual Fund Performance

2018 ◽  
Vol 53 (6) ◽  
pp. 2491-2523 ◽  
Author(s):  
Chuan-Yang Hwang ◽  
Sheridan Titman ◽  
Yuxi Wang
Keyword(s):  
Mutual Funds ◽  
Initial Public Offerings ◽  
Mutual Fund ◽  
Abnormal Returns ◽  
Fund Performance ◽  
Mutual Fund Performance ◽  
Mutual Fund Managers ◽  
Public Offerings ◽  
Fund Managers ◽  
Elite Universities

Mutual fund managers with degrees from elite universities tend to outperform their counterparts from less elite universities. We show that the better performance of elite graduates is generated from their better connections with underwriters that facilitate allocations to underpriced initial public offerings (IPOs). Indeed, we find that the funds outperformonlyin months when they are connected to underwriters issuing IPOs. A strategy of buying mutual funds in months when they are connected to underwriters scheduled to issue IPOs generates significant abnormal returns, as high as 4.08% per annum in hot markets.

Managers’ skills and fund flows in the Japanese mutual fund market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kozo Omori ◽  
Tomoki Kitamura
Keyword(s):  
Asset Pricing ◽  
Mutual Fund ◽  
Factor Model ◽  
Abnormal Returns ◽  
Search Costs ◽  
Fund Flows ◽  
Mutual Fund Managers ◽  
Content Type ◽  
Fund Managers ◽  
Retail Investors

Purpose Mutual fund investors assess a fund manager’s skills when allocating their capital. To identify the rationale behind retail investors’ decisions, this study aims to examine the relation between mutual fund flows and abnormal returns (alpha), as well as the various risk factors in the Japanese mutual fund market, which has distinctive characteristics regarding investors and distributors. Design/methodology/approach Six standard asset pricing models are used to investigate how investors assess mutual fund managers’ skills: the market-adjusted return, the capital asset pricing model and the Fama–French three-factor model and its augmented versions. Findings Contrary to the literature, this study finds that investors in Japan mainly rely on alpha to assess mutual funds. In particular, investors respond to alpha for fund inflows and their evaluations depend on the market environment and their mutual fund search costs. Originality/value This study measures the response of investors to the skills of mutual fund managers in the Japanese market – especially for funds purchased through bank-related distributors that have aimed to capture inexperienced retail investors since deregulation in the 1990s – and reveals their high response to alpha.

Peer versus Pure Benchmarks in the Compensation of Mutual Fund Managers

2019 ◽  
Author(s):  
Richard B. Evans ◽  
Juan-Pedro Gomez ◽  
Linlin Ma ◽  
Yuehua Tang
Keyword(s):  
Mutual Fund ◽  
Mutual Fund Managers ◽  
Fund Managers
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