TY  - JOUR
AU  - Baker,Malcolm
AU  - Litov,Lubomir
AU  - Wachter,Jessica A.
AU  - Wurgler,Jeffrey
TI  - Can Mutual Fund Managers Pick Stocks? Evidence from the Trades Prior to Earnings Announcements
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10685
PY  - 2004
Y2  - August 2004
UR  - http://www.nber.org/papers/w10685
L1  - http://www.nber.org/papers/w10685.pdf
N1  - Author contact info:
Malcolm Baker
Baker Library 261
Harvard Business School
Soldiers Field
Boston, MA  02163
Tel: 617/495-6566
Fax: 617/496-5271
E-Mail: mbaker@hbs.edu

Lubomir Litov
Washington University in St. Louis
E-Mail: litov@wustl.edu

Jessica Wachter
Department of Finance
2300 SH-DH
The Wharton School
University of Pennsylvania
3620 Locust Walk
Philadelphia, PA 19104
Tel: 215/898-7634
Fax: 215/898-6200
E-Mail: jwachter@wharton.upenn.edu

Jeffrey Wurgler
Stern School of Business, Suite 9-190
New York University
44 West 4th Street
New York, NY  10012
Tel: 212/998-0367
Fax: 212/995-4233
E-Mail: jwurgler@stern.nyu.edu
AB  - 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-based metrics, and those that do well tend to have a growth objective, large size, high turnover, and use incentive fees to motivate managers.
ER  -