Abnormal Returns provides a link to a very interesting paper by Kosowski, Timmerman, Wermers, and White (forthcoming in the Journal of Finance, titled
Can Mutual Fund "Stars" Really Pick Stocks? New Evidence from a Bootstrap Analysis. It's got some pretty high level statistics in it, so if you're not into that you might want to skip it. However, AR summarizes the paper's findings nicely:
- There are fund managers that demonstrate (beyond luck) positive alphas;
- As more funds have entered the marketplace it has become more difficult to identify strong managers;
- Top manager performance persists over time.
The third finding is interesting, because it dovetails with
this recent paper (which I blogged on
here). It gives evidence that there are also
individuals who earn persistent abnormal returns.
You've gotta love the Web - I have a lot more meterial for class these days. I'm teaching about market efficiency next week, so these papers will definitely be on the docket for discussion.