, while mutual fund strategies are largely trend following. The only institutional performers---the 2/3 of hedge fund managers … that are contrarian---earn alpha of 2.4% per year. Contrarian hedge fund managers tend to trade profitably with all other … manager types, especially when purchasing stocks from momentum-oriented hedge and mutual fund managers. Superior contrarian …

Why do investors entrust active mutual fund managers with large sums of money while receiving negative excess returns … on average? Our explanation is that investors have a coarser information set than fund managers which leads them to … systematically misinterpret managers' skill. When investors are unable to correctly quantify risk because they have no knowledge of …

-skill managers outperform their low-skill peers in the following month in terms of raw returns and alphas. This outperformance is …

To understand the nature of hedge fund managers' skills, we study the implementation of risk arbitrage by hedge funds … managers' ability to predict or affect the outcome of merger and acquisition deals; rather, hedge fund managers' superior …