From the paper in the last post:
Last, we consider whether superior performance by other professional traders also is accompanied by market under reaction. For each month and institution, we step back and calculate abnormal returns for the previous 10 years. We then form quintile portfolios based on the rank order of those returns that mimic the holdings of institutions within those quintiles. Finally, we regress monthly mimicking portfolio returns on Carhart’s (1997) four factors. Table 7 contains our results. We observe that estimates of abnormal returns in the form of Jensen’s alpha are non-decreasing and significantly positive for quintiles 4 and 5. Not surprisingly in light of Buffett’s extraordinary performance, the magnitudes are smaller than those for portfolios mimicking Berkshire Hathaway’s holdings. However, the presence of abnormal returns for past top performing institutions suggests that the market under reaction to public disclosures by professional investors is not confined to Berkshire Hathaway. Accordingly, the same arguments for overconfidence among sophisticated market participants as a plausible explanation would seem to apply.
