Mutual Fund Competition, Managerial Skill, and Alpha Persistence

Hoberg, G and Kumar, N and Prabhala, N (2014) Mutual Fund Competition, Managerial Skill, and Alpha Persistence. Working Paper. SSRN. (Unpublished)

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Abstract

What economic forces limit mutual fund managers from generating consistent outperformance? We propose and test the hypothesis that buy-side competition from other funds matters. We make three contributions in this regard. First, we propose new style-based spatial methods to identify the customized rivals of each fund. Second, we construct dynamic, fund-specific measures of competition and generate measures of skill as a fund's outperformance relative to its customized peers. Finally, we show that funds outperforming their customized rivals generate future alpha when they face less competition. These results are economically significant and last for over four quarters.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Kumar, NUNSPECIFIED
Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Mutual funds, Alpha, Skill, Persistence, Competition, Peers, Benchmarking
Subjects: Finance
Depositing User: Ilayaraja M
Date Deposited: 08 Jun 2019 12:21
Last Modified: 08 Jun 2019 12:21
URI: http://eprints.exchange.isb.edu/id/eprint/1031
Publisher URL: http://dx.doi.org/10.2139/ssrn.2422906
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