What a Difference a Ph.D. Makes: More than Three Little Letters
- Chaudhuri, Ivkovich, Pollet, and Trzcinka
- A version of the paper can be found here.
- Want a summary of academic papers with alpha? Check out our free Academic Alpha Database!
- CXO has a nice summary here
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.
Data Sources:
CRSP/Compustat, Informa, Mobius Group
Alpha Highlight:
Looks like an additional 42.7bps a year.
Commentary:
- I’m sceptical that 42.7bps a year in additional return is worth the hassle of having to deal with a PhD :-)
About the Author: Wesley Gray, PhD
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For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Third party information may become outdated or otherwise superseded without notice. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency has approved, determined the accuracy, or confirmed the adequacy of this article.
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