The DOI matches its Crossref record; 51 of the 51 references it cites were found in a registry or an index.
Can Mutual Fund Managers Pick Stocks? Evidence from Their Trades Prior to Earnings Announcements
Open accessAbstract
Recent research finds that the stocks that mutual fund managers buy outperform the stocks that they sell (e.g., Chen, Jegadeesh, and Wermers (2000)). We study the nature of this stock-picking ability. We construct measures of trading skill based on how the stocks held and traded by fund managers perform at subsequent corporate earnings announcements. This approach increases the power to detect skilled trading and sheds light on its source. We find that the average fund’s recent buys significantly outperform its recent sells around the next earnings announcement, and that this accounts for a disproportionate fraction of the total abnormal returns to fund trades estimated in prior work. We find that mutual fund trades also forecast earnings surprises. We conclude that mutual fund managers are able to trade profitably in part because they are able to forecast earnings-related fundamentals.
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Cites
On Persistence in Mutual Fund Performance
Carhart, M. M. (1997) · The Journal of Finance · doi:10.1111/j.1540-6261.1997.tb03808.x · Cited by 17,283
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Fama, E. F., & MacBeth, J. D. (1973) · Journal of Political Economy · doi:10.1086/260061 · Cited by 14,258
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Fama, E. F. (1970) · The Journal of Finance · doi:10.2307/2325486 · Cited by 13,635
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FAMA, E. F. (1991) · The Journal of Finance · doi:10.1111/j.1540-6261.1991.tb04636.x · Cited by 5,350
THE PERFORMANCE OF MUTUAL FUNDS IN THE PERIOD 1945–1964
Jensen, M. C. (1968) · The Journal of Finance · doi:10.1111/j.1540-6261.1968.tb00815.x · Cited by 4,329
Managing with Style: The Effect of Managers on Firm Policies
Bertrand, M., & Schoar, A. (2003) · The Quarterly Journal of Economics · doi:10.1162/003355303322552775 · Cited by 3,894
Size and Book‐to‐Market Factors in Earnings and Returns
FAMA, E. F., & FRENCH, K. R. (1995) · The Journal of Finance · doi:10.1111/j.1540-6261.1995.tb05169.x · Cited by 3,430
Measuring Mutual Fund Performance with Characteristic‐Based Benchmarks
DANIEL, K., GRINBLATT, M., TITMAN, S., & WERMERS, R. (1997) · The Journal of Finance · doi:10.1111/j.1540-6261.1997.tb02724.x · Cited by 2,778
Cited by
Measuring skill in the mutual fund industry
Berk, J. B., & van Binsbergen, J. H. (2015) · Journal of Financial Economics · doi:10.1016/j.jfineco.2015.05.002 · Cited by 820
Winners in the spotlight: Media coverage of fund holdings as a driver of flows
Solomon, D. H., Soltes, E., & Sosyura, D. (2014) · Journal of Financial Economics · doi:10.1016/j.jfineco.2014.02.009 · Cited by 361
Metadata
- Authors
- Baker, M., Litov, L., Wachter, J. A., & Wurgler, J.
- Venue
- Journal of Financial and Quantitative Analysis
- Publisher
- Cambridge University Press (CUP)
- Published
- 2010-08-02
- Volume
- 45
- Issue
- 5
- Pages
- 1111-1131
- ISSN
- 0022-1090 (ISSN-L)
- 1756-6916
- OpenAlex
- W3124910102
- Cited by
- 298
- References
- 51
- FWCI
- 33.19
- Type
- journal article
- Language
- en
- Open access
- green
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
