How to Tell if a Money Manager Knows More

Working Paper: NBER ID: w9791

Abstract: In this paper, we develop a methodology to identify money managers who have private information about future asset returns. The methodology does not rely on a specific risk model, such as the Sharpe ratio, CAPM, or APT. Instead, it relies on the observation that returns generated by managers with private information cannot be replicated by those without it. Using managers' trading records, we develop distribution-free tests that can identify such managers. We show that our approach is general with regard to the nature of private information the managers may have, and with regard to the trading strategies they may follow.

Keywords: No keywords provided

JEL Codes: G0

Causal Claims Network Graph

Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.

Causal Claims

Cause	Effect
private information (D82)	returns that cannot be replicated by uninformed managers (D80)

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