Fund Manager Use of Public Information: New Evidence on Managerial Skills




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    • Kacperczyk is at the Sauder School of Business, University of British Columbia. Seru is at the Ross School of Business, University of Michigan. Our special thanks go to Uday Rajan and John DiNardo for numerous helpful discussions. We thank Jonathan Berk, Nikë Bharucha, Murray Carlson, John Chalmers, Richard Deaves, Ilia Dichev, Amy Dittmar, Wayne Ferson, Ron Giammarino, Rob Heinkel, Harrison Hong, Zbigniew Kominek, Robert Kosowski, Reuven Lehavy, Kai Li, Vikram Nanda, Hernan Ortiz-Molina, Ľuboš Pástor, Łukasz Pomorski, Josh Rauh, Scott Richardson, Nejat Seyhun, Sophie Shive, Tyler Shumway, Clemens Sialm, Rajeeva Sinha, Mark Soliman, Rob Stambaugh (the editor), Steve Todd, Josef Zechner, an associate editor, two anonymous referees, and seminar participants at Michigan, the NFA Meetings in Vancouver, the Pacific Northwest Finance Conference at Oregon, and the WFA meetings in Keystone for comments and helpful discussions. We thank IBES for making their data available for public use. We also thank Kenneth French for making the factors available for public use. The first author acknowledges research support from the Social Sciences and Humanities Research Council of Canada. The second author acknowledges financial support from Mitsui Life Financial Research Center at the Ross School of Business in acquiring the Spectrum/CDA data set.


We show theoretically that the responsiveness of a fund manager's portfolio allocations to changes in public information decreases in the manager's skill. We go on to estimate this sensitivity (RPI) as the R2 of the regression of changes in a manager's portfolio holdings on changes in public information using a panel of U.S. equity funds. Consistent with RPI containing information related to managerial skills, we find a strong inverse relationship between RPI and various existing measures of performance, and between RPI and fund flows. We also document that both fund- and manager-specific attributes affect RPI.