From: beliavsky@aol.com
Newsgroups: misc.invest.financial-plan
Subject: Re: Luck or skill?
Date: 22 Jun 2005 14:30:04 GMT
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If performance differences among money managers are partly due to
skill, one would expect those differences to be correlated to relevant
characteristics of managers, such as intelligence. There is research
showing that intelligence is highly correlated with SAT scores and that
managers who attended high-SAT schools (and probably have higher scores
themselves) outperform other managers on average. If investing in
stocks involved no more skill than coin-flipping, one would not expect
to see such correlations. The references are below.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=686849
Hedge Fund Performance and Manager Characteristics - Education and Age
Matter When Selecting Your Hedge Fund Managers
HAITAO LI
Cornell University - Samuel Curtis Johnson Graduate School of
Management
RUI ZHAO
Columbia Business School
XIAOYAN ZHANG
Cornell University - Samuel Curtis Johnson Graduate School of
Management
Abstract:
Using a large sample of characteristics of hedge fund managers, we
provide probably the first comprehensive empirical analysis of hedge
fund performance and manager characteristics. We document a strong
relation between hedge fund risk-taking behavior and performance (both
raw and risk-adjusted returns) and manager educational background and
working experience. For example, we find that managers from higher-SAT
undergraduate institute tend to have better performance and take less
risks. We also find that managers with longer working experience tend
to have worse performance. These findings are robust to the many
risk-adjustment models we consider for hedge funds. Our results confirm
the conjecture of Chevalier and Ellison (1999) that certain portfolio
managers are indeed better than others and can be valuable to hedge
fund investors in identifying managers with superior performance.
Keywords: Hedge fund performance, manager characteristics, risk
adjustments, panel-data regression
JEL Classifications: G23, G11, G12

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=225637
Are Some Mutual Funds Managers Better Than Others? Cross-Sectional
Patterns in Behavior and Performance
JUDITH A. CHEVALIER
Yale School of Management; National Bureau of Economic Research (NBER)
GLENN ELLISON
Massachusetts Institute of Technology (MIT) - Department of Economics;
National Bureau of Economic Research (NBER)
December 1996
NBER Working Paper No. W5852
Abstract:
In this paper we explore cross-sectional differences in the behavior
and performance of mutual fund managers. In our simplest regression of
a fund's market excess return on characteristics of its manager we find
that younger managers earn much higher returns than older managers and
that managers who attended colleges with higher average SAT scores earn
much higher returns than do managers from less selective institutions.
These differences appear to derive both from systematic differences in
expense ratios and risk-taking behavior and from additional systematic
differences in performance managers from higher SAT schools have higher
risk-adjusted excess returns. Managers with the paper also presents a
preliminary look at the labor market for mutual fund managers. Our data
suggest that managerial turnover is more performance sensitive for
younger managers.