Which trading strategies differentiate skilled mutual fund managers from their unsuccessful peers? This study provides evidence for a positive association between holdings' implied cost of capital (ICC) and future fund performance. Consistent with large transaction costs of ICC-based investments...

In the continued debate over passive and active funds, literature commonly looks at superior returns and their persistence when measuring fund performance. This paper, however, demonstrates that over time, superior returns can create losses that supersede gains after accounting for costs typical...