SMU SOE Seminar (Nov 27, 2019): Skill and Value Creation in the Mutual Fund Industry

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ABSTRACT We develop a simple, nonparametric approach for estimating the entire distributions of mutual fund skill and its economic value. Our approach avoids the challenge of specifying these distributions and accommodates the need to study jointly multiple skill measures. Our results show that most funds (i) are skilled at detecting proﬁtable trades,(ii) face tight capacity constraints, and (iii) extract positive value from their skills. We also show that investment and trading skills vary substantially across funds and are strongly correlated—two features that are partly driven by the fund strategies. Finally, we ﬁnd that the fund industry (i) is not heavily concentrated, (ii) does a good job at maximizing proﬁts, and (iii) is in a strong bargaining position vis-a-vis investors. Keywords: Mutual funds, skill, value added, nonparametric estimation, large unbalanced panel. JEL Codes: G11, G12, C14, C33, C58. Click here to view the paper. Click here to view the CV.
		PRESENTER Olivier Scaillet University of Geneva
		RESEARCH FIELDS Econometric Theory Econometrics applied to Finance Insurance Derivative Pricing Asset Allocation
		DATE: 27 November 2019 (Wednesday)
		TIME: 4pm - 5.30pm
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903