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Skill Versus Luck by Michael A. Ervolini

Skill Versus Luck

Taking the Guessing Out of Equity Fund Selection

Michael A. Ervolini

MIT Press · Print & ebook · February 3, 2026

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

Investment & Trading StrategiesPortfolio ManagementMutual Funds & ETFsbusiness
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economicsmoneymanagement
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Who it’s for
Decision-based analytics connect managers’ investment decisions to excess returns to measure skill.
Genres
Portfolio Management, Investment & Trading Strategies, Mutual Funds & ETFs
Published
MIT Press, February 3, 2026

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About this book

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’être 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?

Continue reading

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.

Measuring Manager Skill

Decision-based analytics connect managers’ investment decisions to excess returns to measure skill.

Come here for

  • How decisions are linked to fund excess returns
  • Questions about whether skill improves, declines, or holds steady

Expect

  • A contrast with outcome-based analytics
  • A focus on equity fund allocation decisions

Where it sits

Portfolio Management53%
Investment & Trading Strategies40%
Mutual Funds & ETFs38%

Percentages are BookFrontier’s reading of the book.

Publisher categories

  • Private Equity
  • Investment & Trading Strategies
  • Portfolio Management
Authors
Michael A. Ervolini
Publisher
MIT Press
Published
February 3, 2026
Format
Print & ebook
Reading lane
Private Equity