Working Paper: NBER ID: w18184
Authors: Jonathan B. Berk; Jules H. van Binsbergen
Abstract: Using the dollar-value a mutual fund manager adds as the measure of skill, we find that not only does skill exist (the average mutual fund manager adds about $2 million per year), but this skill is persistent, as far out as 10 years. We further document that investors recognize this skill and reward it by investing more capital with skilled managers. Higher skilled managers are paid more and there is a strong positive correlation between current managerial compensation and future performance.
Keywords: Managerial Skill; Mutual Funds; Economic Rents
JEL Codes: G11; G20; G23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher managerial skill (M54) | greater value added (D46) |
| higher managerial skill (M54) | higher compensation (J33) |
| higher compensation (J33) | greater value added (D46) |
| higher compensation (J33) | future performance (L25) |
| greater value added (D46) | higher compensation (J33) |