From Morningstar: In 2005, three academics published a remarkable paper. “Judging Fund Managers by the Company They Keep” by Randolph Cohen, Joshua Coval, and Lubos Pastor debuted a powerful method of forecasting the future performance of US equity funds.
The authors’ secret: rather than rank funds by their past performances — which are unreliable at best and unavailable for funds that have new managers — they instead evaluated their portfolios. Does a fund hold mostly good stocks or duds?..
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