Cornell, Hsu, and Nanigian discover that the investment manager selection methodology commonly employed by industry practitioners turns out, in fact, to be a detriment to performance.
The recent track record of an active manager contains no useful information about her future outperformance. In fact, recent performance is often a contrarian indicator! Asset owners, who select managers based only on strong recent outperformance, are likely to have much worse long-term performance than even those who just randomly select managers without examining track records.
To learn more, read the full paper here.