Collective Intelligence Market Model

Abstract

I provide a framework for organizing the equity markets estimating expected returns based on the collective intelligence of active equity mutual fund investment teams. Buy-side analysts, in particular, display considerable stock picking skill and by harnessing this skill, it is possible to intelligently organize the markets of both funds and individual stocks, as well as identify, by means of estimated expected returns, the best funds, the best idea stocks, and markets. The combination of these methodologies is referred to as the Collective Intelligence Market Model.

Keywords: mutual fund performance, selection skill, portfolio drag, Modern Portfolio Theory, portfolio management, conviction, tracking error

JEL Classification: G12, G15, C82