Fund manager use of public information: new evidence on managerial skills

Fund manager use of public information: new evidence on managerial skills

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Article ID: iaor2009765
Country: United Kingdom
Volume: 62
Issue: 2
Start Page Number: 485
End Page Number: 528
Publication Date: Apr 2007
Journal: Journal of Finance
Authors: ,
Keywords: portfolio management
Abstract:

We show theoretically that the responsiveness of a fund manager's portfolio allocations to changes in public information decreases in the manager's skill, We go on to estimate this sensitivity (RPI) as the R2 of the regression of changes in a manager's portfolio holdings on changes in public information using a panel of U.S. equity funds. Consistent with RPI containing information related to managerial skills, we find a strong inverse relationship between RPI and various existing measures of performance, and between RPI and fund flows. We also document that both fund- and manager-specific attributes affect RPI.

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