Investors would be wise to work with mutual fund managers who pay close attention to macroeconomic investment trends when the market is declining and microeconomic factors when the market is rising, according to three New York University Stern professors, Marcin Kacperczyk, Stijn Van Nieuwerburgh and Laura Veldkamp.

They found that the top 25% of actively managed equity mutual funds exhibited extraordinary stock-picking ability during expansionary periods and sound market timing ability in recessions. They also found that the funds they managed tended to be smaller, and that the managers held MBA degrees and moved to hedge funds later in their careers.

“The current recession has left many investors with lost confidence in financial markets and, more narrowly, in the people managing their money,” Kacperczyk said. “Given that we are currently in a recession, our work suggests that individuals should be looking for a different type of investment manager: one that invests based on macro information.”

The paper is available at:

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