With so many funds on the market, investors are constantly on the lookout for some way to predict manager performance other than simply relying on historical returns and risk measures.

One way, suggests University of British Columbia professor Marcin Kacperczyk, is to measure the extent to which a manager’s performance is correlated with reliance on public information (RPI), as evidenced by sell-side analyst recommendations. Looking back, if the weight of all stocks in the portfolio is exactly what previous analyst picks would suggest, the manager is deemed to rely entirely on this information. If those weights can’t be explained at all by the analyst’s recommendations, the manager is considered to be acting independently, using more closely held data.

Kacperczyk and colleague Amit Seru of the University of Michigan maintain that the value added in most portfolios is generated by swimming against the tide of analyst picks rather than against the market itself. To support their thesis, they collated information on U.S. mutual funds over a 10-year period, processed the data and reached some surprising conclusions.

It turns out that the more use an investment manager makes of information in the public domain, such as financial statements or company actions or announcements, the poorer his returns are. On the other hand, mutual funds with lower RPI tend to exhibit higher returns adjusted for commonly used risk/style factors such as market capitalization, value and momentum, the authors say.

“Controlling for past fund performance and other fund-specific characteristics, funds with low RPI are rewarded with higher money flows, suggesting that outside investors learn about managerial skills and allocate their wealth accordingly,” the researchers maintain.

The study also found that smaller funds tend to rely more on public information than do larger funds, because managers of these funds are less skilled, because they have fewer resources or because their counterparts at larger funds can’t readily adjust to new analyst picks.

Funds that rely more heavily on publicly available information also tend to have lower fees. And older funds have lower RPIs, which seems to fall even more when a new manager takes the helm.

Some managers really are better than others, the researchers conclude, and the managers’ performance is related to their ability to create and exploit information through research, talent or analytical ability rather than from published reports.

Public information does, of course, drive stock prices in other ways, as evidenced by recent research conducted by Thomas Arnold, John H. Earl Jr. and David S. North, all finance professors at the University of Richmond. Rather than looking at managerial skill, their study focused on the publicity individual companies receive.

The professors looked at how a company’s stock responded to a cover story in Business Week, Fortune or Forbes over a 20-year period. They grouped the cover stories into categories based on coverage: very positive, neutral or very negative. Then they looked at how the shares of those companies had performed in the 500 days prior to and after the cover stories appeared.

Not surprising, the study found that positive stories follow periods of positive performance and less flattering stories show up after periods of negative results. More interesting, it also found that the appearance of a cover story tended to signal the end of this unusual performance, suggesting that inves-tors who trade on such news are not likely to do well.

The study also found a strong bias toward positive stories and that the companies described in the articles tended to have outperformed the market before the stories were released by an impressive 43%, on average. But, after the reports, the situation was reversed in that the companies that received negative coverage began to flourish and beat the index by 12%. The ones that received plaudits quickly regressed, outperforming the index by only 4%.

By the time the articles are published, their contents are no longer news, the study’s authors maintain. And, almost always, the stock price of the highlighted company already reflects its prospects. IE