2012 Theses Doctoral
The Cross-Section of Investing Skill
Building on insights from the economics of superstars, I develop an efficient method for estimating the skill of mutual fund managers. Outliers are especially helpful for disentangling skill from luck when I explicitly model the cross-sectional distribution of managerial skill using a flexible and realistic function. Forecasted performance is dramatically improved relative to standard regression estimates: an investor selecting (avoiding) the best (worst) decile of funds would improve risk-adjusted performance by 2% (3%) annually. The distribution of skill is found to be fat-tailed and positively skewed, providing a theoretical explanation for the convexity of fund flows.
Subjects
Files
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Sastry_columbia_0054D_10812.pdf application/pdf 667 KB Download File
More About This Work
- Academic Units
- Business
- Thesis Advisors
- Johannes, Michael S.
- Degree
- Ph.D., Columbia University
- Published Here
- June 6, 2012