Finance Papers
Document Type
Journal Article
Date of this Version
10-2015
Publication Source
Journal of Financial Economics
Volume
118
Issue
1
Start Page
1
Last Page
20
DOI
10.1016/j.jfineco.2015.05.002
Abstract
Using the value that a mutual fund extracts from capital markets as the measure of skill, we find that the average mutual fund has used this skill to generate about $3.2 million per year. Large cross-sectional differences in skill persist for as long as ten years. Investors recognize this skill and reward it by investing more capital with better funds. Better funds earn higher aggregate fees, and a strong positive correlation exists between current compensation and future performance. The cross-sectional distribution of managerial skill is predominantly reflected in the cross-sectional distribution of fund size, not gross alpha.
Copyright/Permission Statement
© 2015. This manuscript version is made available under the CC-BY-NC-ND 4.0 license
Keywords
mutual funds, managerial skill, alpha
Recommended Citation
Berk, J. B., & Binsbergen, J. v. (2015). Measuring Skill in the Mutual Fund Industry. Journal of Financial Economics, 118 (1), 1-20. http://dx.doi.org/10.1016/j.jfineco.2015.05.002
Embargo Date
5-8-2018
Included in
Business Administration, Management, and Operations Commons, Finance and Financial Management Commons
Date Posted: 27 November 2017