Opinion: The difficulty of telling whether a manager is talented or just lucky

Is good investing down to luck or skill?

"The market doesn't make any sense right now!" "The market is irrational!" "The market is wrong!"

Anyone who has worked long enough on the trading floor of an asset management firm, a hedge fund or an investment bank must have heard variations of these sentences at least once in their career. The first time for me was late 2007, when I was fresh out of the ivory tower that was my PhD. That July, we had seen the sudden shutdown of two Bear Stearns hedge funds and a subsequent turbulent summer.  After years of good results - which had coincided with five years of strong bull markets - the European fund at my then employer began experiencing the first signs of significant underperfor...