NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

How to Tell if a Money Manager Knows More?

Sergey Iskoz, Jiang Wang

NBER Working Paper No. 9791
Issued in June 2003
NBER Program(s):   AP

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.

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Document Object Identifier (DOI): 10.3386/w9791

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