Date of Award

Summer 2017

Document Type


Degree Name

Doctor of Philosophy (PhD)


Business Administration-Finance

Committee Director

John A. Doukas

Committee Member

Mohammad Najand

Committee Member

David Selover


The mutual fund research focus has switched from whether average active fund managers have fund management skill to whether a subset of active fund managers have skills that produce investor benefits. In this dissertation we participate into the study stream by investigating the relation between managerial skills possessed by mutual fund managers and fund performance.

Essay 1 focuses on whether investor sentiment affects the performance of skilled mutual fund managers. Stocks during periods of high investor sentiment are more likely to have noise, while during low investor sentiment periods stocks are more likely to trade close to their fundamental values. This implies that skilled fund managers are more likely to benefit fund investors the most during periods of high sentiment when asset prices are noisier and information is costlier. We empirically examine and confirm this intuition. Our results persist after distinguishing between management “skill” and “luck”.

Essay 2 addresses the question that whether skilled fund managers’ value added stock picking ability is associated with investing in firms run by skilled CEOs. We find that the performance of high managerial ability stocks has a strong explanation power on the performance of mutual funds with skilled managers. Our results suggest that fund managers’ ability to find and invest in firms with skilled CEOs is an essential element of their stock picking ability, and it can enhance the fund future performance significantly.

Essay 3 questions whether skill exists among European mutual fund industry, and if so, what factors can influence the validity and profitability of the skill. This research presents evidence that managerial skill exists in the European mutual fund industry. Furthermore, the relation remains positive and significant after controlling for investor sentiment and market dispersion. Additionally, we find a strong mediating effect of country characteristics on the relation between fund selectivity and fund performance.

Overall, this dissertation investigates the efficiency of fund manager’s skills under different market states, finds the essential elements of fund manager’s stock picking skills, and explores the research to other countries. Given the vital role of mutual fund industry to the financial markets, the findings of this dissertation show important values for further academic research and industry implications.