From the Social Science Research Network:
Marcin T. Kacperczyk
Imperial College London - Accounting, Finance, and Macroeconomics; National Bureau of Economic Research (NBER)
Stijn Van Nieuwerburgh
New York University Stern School of Business, Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
Laura Veldkamp
New York University - Stern School of Business; National Bureau of Economic Research (NBER)
December 5, 2012
Journal of Finance, Forthcoming
Abstract:...Free download (60 page PDF)
We propose a new definition of skill as a general cognitive ability to either pick stocks or time the market at different times. We find evidence for stock picking in booms and for market timing in recessions. Moreover, the same fund managers that pick stocks well in expansions also time the market well in recessions. These fund managers significantly outperform other funds and passive benchmarks. Our results suggest a new measure of managerial ability that gives more weight to a fund’s market timing in recessions and to a fund’s stock picking in booms. The measure displays far more persistence than either market timing or stock picking alone and can predict fund performance.
*Along with his co-author on a paper from years ago, Princeton's Harrison Hong.
We'll come back to Professor Kacperczyk tomorrow, in the meantime here was our note on Professor Hong:
...Prof. Hong lists his research interests as:
"Asset pricing with less-than-fully-rational investors; differences of opinion, short-sales constraints and asset prices; social interaction and financial markets; career concerns, biased forecasts and security analysts; organization, performance and mutual funds; asset pricing with asymmetric information and other market imperfections."Hey! Mine too!
