Academic finance seems to be making some headway in measuring the skill of mutual fund managers. We noted previously two methods that seem to be able distinguish the skill of fund managers. Now we highlight another study that is forthcoming in the Journal of Finance.

The paper is by Robert Kosowski, Allan Timmermann, Russer Wermers and Hal White and is entitled, "Can Mutual Fund "Stars" Really Pick Stocks? New Evidence from a Bootstrap Analysis." The paper has a number of interesting findings including (but not limited to):

  1. There are fund managers that demonstrate (beyond luck) positive alphas;
  2. As more funds have entered the marketplace it has become more difficult to identify strong managers;
  3. Top manager performance persists over time.

The paper may be a bit too technical for some, but it is worth checking out for those who are interested in the topic of "alpha" and whether there are some fund managers capable of generating it.