Elisabeth Kempf

REVISION: Fifty Shades of QE: Comparing Findings of Central Bankers and Academics
Date Posted:Thu, 08 Apr 2021 11:41:38 -0500
We compare the findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers find QE to be more effective than academic papers do. Central bank papers report larger effects of QE on output and inflation. They also report QE effects on output that are more significant, both statistically and economically, and they use more positive language in the abstract. Central bank researchers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.

New: Fifty Shades of QE: Comparing Findings of Central Bankers and Academics
Date Posted:Fri, 19 Mar 2021 03:33:47 -0500
We compare the findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers find QE to be more effective than academic papers do. Central bank papers report larger effects of QE on output and inflation. They also report QE effects on output that are more significant, both statistically and economically, and they use more positive language in the abstract. Central bank researchers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.

REVISION: The Political Polarization of U.S. Firms
Date Posted:Mon, 22 Feb 2021 03:31:35 -0600
Executive teams in U.S. firms are becoming increasingly politically polarized. We establish this new fact using political affiliations from voter registration records for top executives of S&P 1500 firms between 2008 and 2018. The rise in political homogeneity is explained by both an increasing share of Republican executives and increased sorting by partisan executives into firms with like-minded individuals. We further document substantial heterogeneity across party lines in executives’ beliefs, as proxied by their trading of company stock around presidential elections, as well as in firms’ investment decisions.

REVISION: Fifty Shades of QE: Comparing Findings of Central Bankers and Academics
Date Posted:Fri, 05 Feb 2021 02:18:55 -0600
We compare the findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers find QE to be more effective than academic papers do. Central bank papers report larger effects of QE on output and inflation. They also report QE effects on output that are more significant, both statistically and economically, and they use more positive language in the abstract. Central bank researchers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.

REVISION: Fifty Shades of QE: Comparing Findings of Central Bankers and Academics
Date Posted:Fri, 05 Feb 2021 02:18:30 -0600
We compare the findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers find QE to be more effective than academic papers do. Central bank papers report larger effects of QE on output and inflation. They also report QE effects on output that are more significant, both statistically and economically, and they use more positive language in the abstract. Central bank researchers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.

REVISION: Fifty Shades of QE: Comparing Findings of Central Bankers and Academics
Date Posted:Fri, 05 Feb 2021 02:17:52 -0600
We compare the findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers find QE to be more effective than academic papers do. Central bank papers report larger effects of QE on output and inflation. They also report QE effects on output that are more significant, both statistically and economically, and they use more positive language in the abstract. Central bank researchers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.

New: Partisan Professionals: Evidence from Credit Rating Analysts
Date Posted:Fri, 08 Jan 2021 17:18:48 -0600
Partisan perception affects the actions of professionals in the financial sector. Linking credit rating analysts to party affiliations from voter records, we show that analysts who are not affiliated with the U.S. president's party downward-adjust corporate credit ratings more frequently. Since we compare analysts with different party affiliations covering the same firm in the same quarter, differences in firm fundamentals cannot explain the results. We also find a sharp divergence in the rating actions of Democratic and Republican analysts around the 2016 presidential election. Our results show analysts' partisan perception has price effects and may influence firms' investment policies.

REVISION: Fifty Shades of QE: Conflicts of Interest in Economic Research
Date Posted:Thu, 19 Nov 2020 02:52:44 -0600
Central banks sometimes evaluate their own policies. To assess the inherent conflict of interest, we compare the research findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers report larger effects of QE on output and inflation. Central bankers are also more likely to report significant effects of QE on output and to use more positive language in the abstract. Central bankers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.

REVISION: Fifty Shades of QE: Conflicts of Interest in Economic Research
Date Posted:Mon, 19 Oct 2020 02:06:31 -0500
Central banks sometimes evaluate their own policies. To assess the inherent conflict of interest, we compare the research findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers report larger effects of QE on output and inflation. Central bankers are also more likely to report significant effects of QE on output and to use more positive language in the abstract. Central bankers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks re-veals substantial involvement of bank management in research production.

REVISION: Fifty Shades of QE: Conflicts of Interest in Economic Research
Date Posted:Fri, 16 Oct 2020 03:11:19 -0500
Central banks sometimes evaluate their own policies. To assess the inherent conflict of interest, we compare the research findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers report larger effects of QE on output and inflation. Central bankers are also more likely to report significant effects of QE on output and to use more positive language in the abstract. Central bankers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.

REVISION: Fifty Shades of QE: Conflicts of Interest in Economic Research
Date Posted:Thu, 15 Oct 2020 03:57:08 -0500
Central banks sometimes evaluate their own policies. To assess the inherent conflict of interest, we compare the research findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers report larger effects of QE on output and inflation. Central bankers are also more likely to report significant effects of QE on output and to use more positive language in the abstract. Central bankers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.

REVISION: Attracting the Sharks: Corporate Innovation and Securities Class Action Lawsuits
Date Posted:Mon, 05 Oct 2020 04:11:46 -0500
This paper provides novel evidence suggesting that securities class action lawsuits, a central pillar of the U.S. litigation and corporate governance system, can constitute an obstacle to valuable corporate innovation. We first establish that valuable innovation output makes firms particularly vulnerable to costly low-quality class action litigation. Exploiting judge turnover in federal courts, we then show that changes in class action litigation risk affect the value and number of patents filed, suggesting firms take into account that risk in their innovation decisions. Our results challenge the widely held view that greater failure propensity of innovative firms drives their litigation risk.

REVISION: Fifty Shades of QE: Conflicts of Interest in Economic Research
Date Posted:Mon, 28 Sep 2020 06:26:39 -0500
Central banks sometimes evaluate their own policies. To assess the inherent conflict of interest, we compare the research findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers report larger effects of QE on output and inflation. Central bankers are also more likely to report significant effects of QE on output and to use more positive language in the abstract. Central bankers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.

REVISION: Attracting the Sharks: Corporate Innovation and Securities Class Action Lawsuits
Date Posted:Mon, 28 Sep 2020 03:45:41 -0500
This paper provides novel evidence suggesting that securities class action lawsuits, a central pillar of the U.S. litigation and corporate governance system, can constitute an obstacle to valuable corporate innovation. We first establish that valuable innovation output makes firms particularly vulnerable to costly low-quality class action litigation. Exploiting judge turnover in federal courts, we then show that changes in class action litigation risk affect the value and number of patents filed, suggesting firms take into account that risk in their innovation decisions. Our results challenge the widely held view that greater failure propensity of innovative firms drives their litigation risk.

REVISION: Fifty Shades of QE: Conflicts of Interest in Economic Research
Date Posted:Thu, 17 Sep 2020 08:53:45 -0500
Central banks sometimes evaluate their own policies. To assess the inherent conflict of interest, we compare the research findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers report larger effects of QE on output and inflation. Central bankers are also more likely to report significant effects of QE on output and to use more positive language in the abstract. Central bankers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.

REVISION: Fifty Shades of QE: Conflicts of Interest in Economic Research
Date Posted:Wed, 16 Sep 2020 11:19:27 -0500
Central banks sometimes evaluate their own policies. To assess the inherent conflict of interest, we compare the research findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers report larger effects of QE on output and inflation. Central bankers are also more likely to report significant effects of QE on output and to use more positive language in the abstract. Central bankers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.

REVISION: Litigating Innovation: Evidence from Securities Class Action Lawsuits
Date Posted:Thu, 02 Jan 2020 10:24:46 -0600
Low-quality securities class action lawsuits disproportionally target firms with valuable innovation output and lead to substantial shareholder-value losses. We establish this fact using data on class action lawsuits between 1996 and 2011 and the value of newly granted patents as a measure of valuable innovation output. Our results challenge the widely-held view that greater failure propensity of innovative firms drives their litigation risk. Instead, our findings suggest that valuable innovation output makes a firm an attractive litigation target. Our results support the view that the class action litigation system may have adverse effects on the competitiveness of the U.S. economy.

REVISION: Litigating Innovation: Evidence from Securities Class Action Lawsuits
Date Posted:Tue, 10 Dec 2019 03:52:40 -0600
Low-quality securities class action lawsuits disproportionally target firms with valuable innovation output and lead to substantial shareholder-value losses. We establish this fact using data on class action lawsuits between 1996 and 2011 and the value of newly granted patents as a measure of valuable innovation output. Our results challenge the widely-held view that greater failure propensity of innovative firms drives their litigation risk. Instead, our findings suggest that valuable innovation output makes a firm an attractive litigation target. Our results support the view that the class action litigation system may have adverse effects on the competitiveness of the U.S. economy.

REVISION: Litigating Innovation: Evidence from Securities Class Action Lawsuits
Date Posted:Thu, 11 Jul 2019 03:21:10 -0500
Low-quality securities class action lawsuits disproportionally target firms with valuable innovation output and impose a substantial implicit "tax" on these firms. We establish this fact using data on class action lawsuits against U.S. corporations between 1996 and 2011 and the private economic value of a firm's newly granted patents as a measure of valuable innovation output. Our results challenge the widely-held view that it is the greater failure propensity of innovative firms that drives litigation risk. Instead, our findings suggest that valuable innovation output makes a firm an attractive litigation target. More broadly, our results provide new evidence to support the view that the current class action litigation system may have adverse effects on the competitiveness of the U.S. economy.

REVISION: Litigating Innovation: Evidence from Securities Class Action Lawsuits
Date Posted:Sat, 02 Feb 2019 14:51:12 -0600
Low-quality securities class action lawsuits disproportionally target firms with valuable innovation output and impose a substantial implicit "tax" on these firms. We establish this fact using data on class action lawsuits against U.S. corporations between 1996 and 2011 and the private economic value of a firm's newly granted patents as a measure of valuable innovation output. Our results challenge the widely-held view that it is the greater failure propensity of innovative firms that drives litigation risk. Instead, our findings suggest that valuable innovation output makes a firm an attractive litigation target. More broadly, our results provide new evidence to support the view that the current class action litigation system may have adverse effects on the competitiveness of the U.S. economy.

REVISION: Litigating Innovation: Evidence from Securities Class Action Lawsuits
Date Posted:Fri, 14 Dec 2018 10:50:00 -0600
Low-quality securities class action lawsuits disproportionally target firms with valuable innovation output and impose a substantial implicit "tax' on these firms. We establish this fact using data on class action lawsuits against U.S. corporations between 1996 and 2011 and the private economic value of a firm's newly granted patents as a measure of valuable innovation output. Our results challenge the widely-held view that it is the greater failure propensity of innovative firms that drives litigation risk. Instead, our findings suggest that valuable innovation output makes a firm an attractive litigation target. More broadly, our results provide new evidence to support the view that the current class action litigation system may have adverse effects on the competitiveness of the U.S. economy.

REVISION: The Job Rating Game: Revolving Doors and Analyst Incentives
Date Posted:Mon, 12 Nov 2018 08:58:52 -0600
Investment banks frequently hire analysts from rating agencies. While many argue that this "revolving door" creates captured analysts, it can also create incentives to improve accuracy. To study this issue, I construct an original dataset, linking analysts to their career paths and the securitized finance ratings they issue. First, I document that accurate analysts are more frequently hired by underwriting investment banks. Second, I exploit two distinct sources of variation in the likelihood of being hired by a bank. Both indicate that, as this likelihood rises, analyst accuracy improves. The findings suggest policymakers should consider incentive effects alongside capture concerns.

REVISION: The Job Rating Game: Revolving Doors and Analyst Incentives
Date Posted:Mon, 13 Aug 2018 09:22:38 -0500
Investment banks frequently hire analysts from rating agencies. While many argue that this "revolving door' results in captured analysts, it can also create incentives to improve accuracy. To examine these issues, I construct an original dataset that links individual analysts to their career paths and to the securitized finance ratings they issue. I document that accurate analysts are more likely to be hired by underwriting investment banks. In addition, I exploit two distinct sources of variation in the likelihood of being hired by an underwriting bank. Both approaches imply that, as the likelihood to be hired by an underwriter rises, overall analyst accuracy improves. These findings suggest policymakers should consider incentive effects as well as capture concerns.

REVISION: Taxing Successful Innovation: The Hidden Cost of Meritless Class Action Lawsuits
Date Posted:Thu, 22 Mar 2018 11:44:11 -0500
Meritless securities class action lawsuits disproportionally target firms with successful innovations. We establish this fact using data on securities class action lawsuits against U.S. corporations between 1996 and 2011 and the private economic value of a firm's newly granted patents as a measure of innovative success. Our findings suggest that the U.S. securities class action system imposes a substantial implicit "tax" on highly innovative firms, thereby reducing incentives to innovate ex ante. Changes in investment opportunities and corporate disclosure induced by the innovation appear to make successful innovators attractive litigation targets.

REVISION: The Job Rating Game: The Effects of Revolving Doors on Analyst Incentives
Date Posted:Sat, 22 Jul 2017 11:41:03 -0500
Investment banks frequently hire analysts from rating agencies. While many argue this "revolving door" undermines analysts' incentives to issue accurate ratings, this paper suggests it more likely improves accuracy at the rating agencies. Using an original dataset that links employee performance and career paths, I find that credit analysts who issue more accurate ratings are more likely to be hired by investment banks. Optimism does not significantly improve analysts' prospects to be hired, except by investment banks whose issues they have recently rated. Overall, investment banks appear to reward analysts mainly for accuracy rather than favors.

REVISION: Learning by Doing: The Value of Experience and the Origins of Skill for Mutual Fund Managers
Date Posted:Fri, 31 Mar 2017 00:49:38 -0500
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.

REVISION: Learning by Doing: The Value of Experience and the Origins of Skill for Mutual Fund Managers
Date Posted:Thu, 26 Jan 2017 23:33:04 -0600
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.

REVISION: The Job Rating Game: The Effects of Revolving Doors on Analyst Incentives
Date Posted:Tue, 17 Jan 2017 01:27:25 -0600
Investment banks frequently hire analysts from rating agencies. A widely held view is that this "revolving door" undermines analysts' incentives to issue accurate ratings. Using a hand-collected dataset of the performance and career paths of 245 credit analysts between 2000 and 2009, I show that the ratings by analysts who move to investment banks are on average more accurate than those by their non-revolving peers. A notable exception is the few securities underwritten by their future employers, where revolving analysts do not outperform. Overall, my findings suggest that the revolving door may, on average, strengthen analysts' incentives to be accurate.

REVISION: The Job Rating Game: The Effects of Revolving Doors on Analyst Incentives
Date Posted:Fri, 06 Jan 2017 05:24:39 -0600
Investment banks frequently hire credit analysts from rating agencies. A widely held view is that this “revolving door” undermines analysts’ incentives to issue accurate ratings. Using a hand-collected dataset of the performance and career paths of 245 credit rating analysts between 2000 and 2009, I show that the ratings by analysts who eventually move to investment banks are on average more accurate than the ratings by other analysts who rate similar securities at the same point in time. A notable exception is the small fraction of securities underwritten by their future employers, where revolving analysts do not outperform. Overall, my findings suggest that the revolving door may, on average, strengthen rather than distort analysts’ incentives to issue accurate ratings.

REVISION: Learning by Doing: The Value of Experience and the Origins of Skill for Mutual Fund Managers
Date Posted:Mon, 19 Sep 2016 09:35:27 -0500
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.

REVISION: Distracted Shareholders and Corporate Actions
Date Posted:Fri, 15 Jul 2016 09:51:25 -0500
Investor attention matters for corporate actions. Our new identification approach constructs firm-level shareholder "distraction" measures, by exploiting exogenous shocks to unrelated parts of institutional shareholders' portfolios. Firms with "distracted" shareholders are more likely to announce diversifying, value-destroying, acquisitions. They are also more likely to grant opportunistically-timed CEO stock options, more likely to cut dividends, and less likely to fire their CEO for bad performance. Firms with distracted shareholders have abnormally low stock returns. Combined, these patterns are consistent with a model in which the unrelated shock shifts investor attention, leading to a temporary loosening of monitoring constraints.

REVISION: Distracted Shareholders and Corporate Actions
Date Posted:Mon, 04 Jul 2016 21:34:58 -0500
Investor attention matters for corporate actions. Our new identification approach constructs firm-level shareholder "distraction" measures, by exploiting exogenous shocks to unrelated parts of institutional shareholders' portfolios. Firms with "distracted" shareholders are more likely to announce diversifying, value-destroying, acquisitions. They are also more likely to grant opportunistically-timed CEO stock options, more likely to cut dividends, and less likely to fire their CEO for bad performance. Firms with distracted shareholders have abnormally low stock returns. Combined, these patterns are consistent with a model in which the unrelated shock shifts investor attention, leading to a temporary loosening of monitoring constraints.

REVISION: Distracted Shareholders and Corporate Actions
Date Posted:Tue, 26 Apr 2016 14:27:37 -0500
Investor attention matters for corporate actions. Our new identification approach constructs firm-level shareholder "distraction" measures, by exploiting exogenous shocks to unrelated parts of institutional shareholders' portfolios. Firms with "distracted" shareholders are more likely to announce diversifying, value-destroying, acquisitions. They are also more likely to grant opportunistically-timed CEO stock options, more likely to cut dividends, and less likely to fire their CEO for bad performance. Firms with distracted shareholders have abnormally low stock returns. Combined, these patterns are consistent with a model in which the unrelated shock shifts investor attention, leading to a temporary loosening of monitoring constraints.

REVISION: Distracted Shareholders and Corporate Actions
Date Posted:Tue, 31 Mar 2015 07:24:14 -0500
Investor attention matters for corporate actions. Our new identification approach constructs firm-level shareholder "distraction" measures, by exploiting exogenous shocks to unrelated parts of institutional shareholders' portfolios. Firms with "distracted" shareholders are more likely to announce diversifying acquisitions, generating negative short-run and long-run returns. Moreover, their CEOs are more likely to receive opportunistically-timed equity grants. These patterns are consistent with a model in which the unrelated shock shifts investor attention, leading to a temporary loosening of monitoring constraints. Our results are the first to suggest that limited shareholder attention affects corporate investment and CEO pay.

REVISION: Learning by Doing: The Value of Experience and the Origins of Skill for Mutual Fund Managers
Date Posted:Sat, 25 Oct 2014 11:37:57 -0500
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.

REVISION: Distracted Shareholders and Corporate Actions
Date Posted:Sat, 08 Feb 2014 00:32:39 -0600
Investor attention matters for corporate actions. Our new identification approach constructs firm-level shareholder "distraction" measures, by exploiting exogenous shocks to unrelated parts of institutional shareholders' portfolios. Firms with "distracted" shareholders are more likely to announce diversifying acquisitions, generating negative short-run and long-run returns. Moreover, their CEOs are more likely to receive opportunistically-timed equity grants. These patterns are consistent with a model in which the unrelated shock shifts investor attention, leading to a temporary loosening of monitoring constraints. Our results are the first to suggest that limited shareholder attention affects corporate investment and CEO pay.

REVISION: Distracted Shareholders and Corporate Actions
Date Posted:Mon, 18 Nov 2013 14:26:16 -0600
Limited investor attention matters for corporate actions. Our new identification approach constructs firm-level "distraction" measures by exploiting exogenous shocks to unrelated parts of institutional investors' portfolios. When their investors experience unrelated shocks,firms are more likely to announce diversifying acquisitions, generating negative short-run and long-run returns. CEOs are more likely to receive opportunistically-timed equity grants. These patterns are consistent with a model in which the unrelated shock causes shifts in investor attention, leading to a temporary loosening of monitoring constraints. Our results are thefirst to suggest that limited shareholder attention affects investment and CEO pay.

REVISION: Learning by Doing: The Value of Experience and the Origins of Skill for Mutual Fund Managers
Date Posted:Fri, 24 May 2013 14:30:52 -0500
Learning by doing matters for professional investors. We develop a new methodology to show that mutual fund managers outperform by a risk-adjusted 1.5% per quarter in industries where they have experience. 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, their trades become better predictors for abnormal stock returns around ...

REVISION: Learning By Doing: The Value Of Experience And The Origins Of Skill For Mutual Fund Managers
Date Posted:Wed, 23 Jan 2013 11:53:17 -0600
This paper provides evidence for substantial learning by doing effects among professional investors in a large and highly competitive segment of financial markets. We develop a new methodology to show that experienced mutual fund managers outperform their non-experienced counterparts by up to 67bp per quarter on a risk-adjusted basis. This difference reflects pure stock-picking skill and is before fees. The key to our identification strategy is that we look "inside" funds and exploit ...

REVISION: Learning by Doing and the Value of Experience for Mutual Fund Managers
Date Posted:Mon, 06 Aug 2012 16:17:45 -0500
We use a new approach to show that experienced managers outperform their non-experienced counterparts by up to 67bp per quarter on a risk-adjusted basis. This difference reflects pure stock-picking skill and is before fees. 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. Our findings are therefore unrelated to factors that do not vary within manager and quarter, ...