A recent August 2014 Journal of Finance focuses on fund manager skill. The research found that skill actually is the combination of two parts, stock picking and market timing. There has always been the idea that skill can be either through adding alpha or controlling beta, but the best managers do both. Skill manager seem to be able to pick stocks in up markets and cut market exposure in recessions. These are the managers who significantly outperform their peers. It is this two part process which makes managers special. Pick your good stocks but when the markets get rough stand aside and move to cash.
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