Skill Versus Luck: Taking the Guessing Out of Equity Fund Selection

By Michael A. Ervolini

How to move beyond guessing about manager skill with decision-based analytics, not the outcome-based analytics used at present.

Skill is the raison d' tre for active equity management. Yet precious little is known about manager skill. What is skill? Who has it? How should it be measured? Is a manager's skill improving, declining, or remaining consistent? Without answers to such fundamental questions, capital allocators have no choice but to rely on inferences, hunches, and guesswork.

In Skill Versus Luck, Michael Ervolini explains how to move beyond skill fog with newer analytics developed over the past decade. Unlike conventional analytics that simply rehash fund outcomes, the newer cause-and-effect analytics relate a manager's decisions to fund excess returns, providing rigorous measures of manager skill. Results from these newer analytics enable capital allocators to understand manager skill for the first time and make more effective allocation decisions.

• Format: Hardcover
• Language: English
• ISBN: 0262052180
• ISBN13: 9780262052184
• Release Date: February 2026
• Publisher: MIT Press
• Length: 186 Pages