Mutual Fund Competition, Managerial Skill, and Alpha Persistence

Hoberg, G and Kumar, N and Prabhala, N (2018) Mutual Fund Competition, Managerial Skill, and Alpha Persistence. The Review of Financial Studies, 31 (5). pp. 1896-1929.

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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. 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. Third, and 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: Article
Uncontrolled Keywords: Asset Pricing, Trading volume, Bond Interest Rates, Portfolio Choice, Investment Decisions
Subjects: Financial Management
Finance
Depositing User: Veeramani R
Date Deposited: 27 Aug 2018 10:06
Last Modified: 27 Aug 2018 10:06
URI: http://eprints.exchange.isb.edu/id/eprint/579
Publisher URL: http://dx.doi.org/10.1093/rfs/hhx127
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