Are Some Mutual Fund Managers Better Than Others? Cross-Sectional Patterns in Behavior and Performance


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    Chevalier is from the University of Chicago Graduate School of Business and the National Bureau of Economic Research. Ellison is from the Massachusetts Institute of Technology and the National Bureau of Economic Research. We thank Canice Prendergast, Jeremy Stein, René Stulz, an anonymous referee, and seminar participants at Brigham Young, Carnegie Mellon, Stanford, the University of California at Berkeley, the University of California at Los Angeles, the University of Florida, and the University of Michigan for their comments, and Kent Daniel for providing us with the data used in Section V. Both authors thank the National Science Foundation (SBR 94-14141, SBR 95-15076). The first author also acknowledges research support from the Graduate School of Business at the University of Chicago, and both received support from Sloan Research Fellowships. Faris Mansour and Kevin Hartmann provided excellent research assistance.


We examine whether mutual fund performance is related to characteristics of fund managers that may indicate ability, knowledge, or effort. In particular, we study the relationship between performance and the manager's age, the average composite SAT score at the manager's undergraduate institution, and whether the manager has an MBA. Although the raw data suggest striking return differences between managers with different characteristics, most of these can be explained by behavioral differences between managers and by selection biases. After adjusting for these, some performance differences remain. In particular, managers who attended higher-SAT undergraduate institutions have systematically higher risk-adjusted excess returns.