Learning by Doing: The Value of Experience and the Origins of Skill for Mutual Fund Managers
39 Pages Posted: 6 Aug 2012 Last revised: 31 Mar 2017
Date Written: March 30, 2017
Learning by doing matters for professional investors. We develop a new methodology to show that mutual fund managers outperform in industries where they have obtained experience on the job. The key to our identification strategy is that we look "inside'' funds and exploit heterogeneity in experience for the same manager at a given point in time across industries. As fund managers become more experienced, they pick better stocks, and their trades become better predictors for abnormal stock returns around subsequent earnings announcements. Our approach identifies experience as a first-order driver of observed mutual fund manager skill.
Keywords: Learning, Learning-by-Doing, Mutual Funds, Stock-Picking
JEL Classification: G23, D83, J24
Suggested Citation: Suggested Citation