We develop a performance evaluation approach in which a fund manager's skill is judged by the extent to which his investment decisions resemble the decisions of managers with distinguished performance records. The proposed performance measures are estimated more precisely than standard measures,...

Does inefficiency of financial markets have real consequences? Or does it only result in transfers of wealth from noise traders to arbitrageurs? We study firm business investment to address this question. In our model, benevolent managers of overvalued companies invest in projects with negative...