Faculty & Research
Publications
Publications

Best Ideas

By: Miguel Antón, Randolph B. Cohen and Christopher Polk
  • Format:Print
  • | Language:English
  • | Pages:47
ShareBar

Abstract

We find that the stocks in which active mutual fund or hedge fund managers display the most conviction towards ex-ante, their “Best ideas,” outperform the market, as well as the other stocks in those managers’ portfolios, by approximately 2.8 to 4.5 percent per year, depending on the benchmark employed. The vast majority of the other stocks managers hold do not exhibit significant outperformance. Thus, the organization of the money management industry appears to make it optimal for managers to introduce stocks into their portfolio that are not outperformers. We argue that investors would benefit if managers held more concentrated portfolios.

Keywords

Mutual Funds; Managerial Skill; Market Efficiency; Investment Funds; Management; Investment Portfolio; Decision Making

Citation

Antón, Miguel, Randolph B. Cohen, and Christopher Polk. "Best Ideas." Harvard Business School Working Paper, No. 21-004, June 2020.

Supplemental Information

Best Ideas - Internet Appendix

About The Author

Randolph B. Cohen

Finance
More Publications

More from the Authors