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Judging Fund Managers by the Company They Keep

Author

Listed:
  • RANDOLPH B. COHEN
  • JOSHUA D. COVAL
  • ĽUBOŠ PÁSTOR
Abstract
We develop a performance evaluation approach in which a fund manager's skill is judged by the extent to which the manager's investment decisions resemble the decisions of managers with distinguished performance records. The proposed performance measures use historical returns and holdings of many funds to evaluate the performance of a single fund. Simulations demonstrate that our measures are particularly useful in ranking managers. In an application that relies on such ranking, our measures reveal strong predictability in the returns of U.S. equity funds. Our measures provide information about future fund returns that is not contained in the standard measures.

Suggested Citation

  • Randolph B. Cohen & Joshua D. Coval & Ľuboš Pástor, 2005. "Judging Fund Managers by the Company They Keep," Journal of Finance, American Finance Association, vol. 60(3), pages 1057-1096, June.
    • Handle: RePEc:bla:jfinan:v:60:y:2005:i:3:p:1057-1096
    DOI: 10.1111/j.1540-6261.2005.00756.x
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    References listed on IDEAS

    as
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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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