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Can Mutual Fund Managers Pick Stocks? Evidence from the Trades Prior to Earnings Announcements / Malcolm Baker, Lubomir Litov, Jessica A. Wachter, Jeffrey Wurgler.
- Format:
- Book
- Author/Creator:
- Baker, Malcolm.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w10685.
- NBER working paper series no. w10685
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2004.
- Summary:
- We test whether fund managers have stock-picking skill by comparing their holdings and trades prior to earnings announcements with the returns realized at those events. This approach largely avoids the joint-hypothesis problem with long-horizon studies of fund performance. Consistent with skilled trading, we find that, on average, stocks that funds buy earn significantly higher returns at subsequent earnings announcements than stocks that they sell. Funds display persistence in our event return-based metrics, and those that do well tend to have a growth objective, large size, high turnover, and use incentive fees to motivate managers.
- Notes:
- Print version record
- August 2004.
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