Yes, Virginia, there are Superstar Money Managers

Abstract

Berk and Green (2004) argue that, in equilibrium, mutual fund performance is not informative about the skill of the fund managers. Hence, instead of studying mutual fund performance, we study stock recommendations of prominent money managers made at the prestigious Barron’s Roundtable. The 3,472 buy recommendations, from 1968 to 2019 (52 years), on average, earn economically meaningful and statistically significant 4.1% excess returns over the 30 trading days immediately following the Roundtable meetings. To study the skill level across decades, we divide the 52-year-long time-series into four equal 13-year-long periods and find that excess returns are similar for each of the four periods and are statistically significant. Overall, we conclude that money managers are skillful, and that skill has not diminished over the decades.