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Always Bet on Ph.D.


Matt Levine, Bloomberg, Finance Ph.D.s Are Pretty Good at Finance If They Do Say So Themselves, here. Shades of Mr. Snipes in Passenger 57. Bargs killed it last night for the Knicks, does he have a Ph.D.?

And so the field is a parade of papers that identify factors reliably associated with statistically significant outperformance. But last month Ranadeb Chaudhuri,Zoran IvkovichJoshua Pollet and Charles Trzcinkawon. They wrote the most perfect possible finance paper, so everyone else can stop. Well, actually, they can’t, because Chaudhuri et al.’s conclusion is “the world needs more finance papers.” Sort of. Here (viaTyler Cowen) is the abstract:

Several hundred individuals who hold a Ph.D. in economics, finance, or others fields work for institutional money management companies. The gross performance of domestic equity investment products managed by individuals with a Ph.D. (Ph.D. products) is superior to the performance of non-Ph.D. products matched by objective, size, and past performance for one-year returns, Sharpe Ratios, alphas, information ratios, and the manipulation-proof measure MPPM. Fees for Ph.D. products are lower than those for non-Ph.D. products. Investment flows to Ph.D. products substantially exceed the flows to the matched non-Ph.D. products. Ph.D.s’ publications in leading economics and finance journals further enhance the performance gap.


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