Asset Managers with a PhD Outperform…
What a Difference a Ph.D. Makes: More than Three Little Letters
- Chaudhuri, Ivkovich, Pollet, and Trzcinka
- A version of the paper can be found here.
- Want a summary of academic papers with alpha? Check out our free Academic Alpha Database!
- CXO has a nice summary here
Several hundred individuals who hold a Ph.D. in economics, finance, or others fields work for institutional money management companies. The gross performance of domestic equity investment products managed by individuals with a Ph.D. (Ph.D. products) is superior to the performance of non-Ph.D. products matched by objective, size, and past performance for one-year returns, Sharpe Ratios, alphas, information ratios, and the manipulation-proof measure MPPM. Fees for Ph.D. products are lower than those for non-Ph.D. products. Investment flows to Ph.D. products substantially exceed the flows to the matched non-Ph.D. products. Ph.D.s’ publications in leading economics and finance journals further enhance the performance gap.
CRSP/Compustat, Informa, Mobius Group
Looks like an additional 42.7bps a year.
- I’m sceptical that 42.7bps a year in additional return is worth the hassle of having to deal with a PhD 🙂
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Definitions of common statistics used in our analysis are available here (towards the bottom)