Can Mutual Fund Managers Pick Stocks ? Evidence from Their Trades Prior to Earnings Announcements

@inproceedings{Wurgler2004CanMF,
  title={Can Mutual Fund Managers Pick Stocks ? Evidence from Their Trades Prior to Earnings Announcements},
  author={Malcolm Baker Lubomir Litov Jessica A. Wachter Jeffrey Wurgler},
  year={2004}
}
  • Malcolm Baker Lubomir Litov Jessica A. Wachter Jeffrey Wurgler
  • Published 2004
We test whether fund managers have stock-picking skill by comparing their holdings and trades prior to earnings announcements with the returns realized at those events. This approach largely avoids the joint-hypothesis problem with long-horizon studies of fund performance. Consistent with skilled trading, we find that, on average, stocks that funds buy earn significantly higher returns at subsequent earnings announcements than stocks that they sell. Funds display persistence in our event return… CONTINUE READING
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