Distinguishing Fund Managers’ Ability of Evaluating Idiosyncratic Risk

• Main Authors: Ciou-Jyun Lin, 林秋君
• Other Authors: Jin-Ray Lu
• Format: Others
• Published: 2016
• Online Access: http://ndltd.ncl.edu.tw/handle/77664673122749648041

碩士 === 國立東華大學 === 財務金融學系 === 104 === We propose a measure of active portfolio management, the ability of evaluating idiosyncratic risks (AEIRs), to distinguish skilled mutual fund managers. Previous several studies have found that stocks’ expected returns are positively related to the specific risk or unsystematic risk. If fund managers have ability to evaluate stocks’ idiosyncratic risk and then allocate fund capitals into these stocks, they may be promote fund’s future performance. Analyzing the sample of Taiwan equity funds over the period 2009–2014, and controlling fund characteristics such as size, expenses, and turnover in the cross-section, we suggest that skilled fund managers in the top deciles with the highest AEIRs outperform those with the lowest AEIRs by approximately 2.7 percent per month. Moreover, there is a strong persistence in AEIRs for skilled fund managers in one year.