Journal ArticleDOI
Mutual Fund Performance: An Empirical Decomposition into Stock-Picking Talent, Style, Transactions Costs, and Expenses
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In this paper, the authors use a new database to perform a comprehensive analysis of the mutual fund industry and find that funds hold stocks that outperform the market by 1.3 percent per year, but their net returns underperform by one percent.Abstract:
We use a new database to perform a comprehensive analysis of the mutual fund industry. We find that funds hold stocks that outperform the market by 1.3 percent per year, but their net returns underperform by one percent. Of the 2.3 percent difference between these results, 0.7 percent is due to the underperformance of nonstock holdings, whereas 1.6 percent is due to expenses and transactions costs. Thus, funds pick stocks well enough to cover their costs. Also, high-turnover funds beat the Vanguard Index 500 fund on a net return basis. Our evidence supports the value of active mutual fund management.read more
Citations
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ReportDOI
Mutual Fund Flows and Performance in Rational Markets
TL;DR: The authors derive a parsimonious rational model of active portfolio management that reproduces many regularities widely regarded as anomalous, such as high average levels of skills and considerable heterogeneity across managers.
Journal ArticleDOI
How Active Is Your Fund Manager? A New Measure That Predicts Performance
Martijn Cremers,Antti Petajisto +1 more
TL;DR: Active Share as discussed by the authors is defined as the share of portfolio holdings that differ from the benchmark index holdings, i.e., the percentage of shares held by a portfolio holder that is different from the percentage held by the entire portfolio.
Journal ArticleDOI
Voting with their feet: institutional ownership changes around forced CEO turnover
TL;DR: In this paper, the authors investigate whether institutional investors vote with their feet when dissatisfied with a firm's management by examining changes in equity ownership around forced CEO turnover and find that aggregate institutional ownership and the number of institutional investors decline in the year prior to forcing CEO turnover.
Journal ArticleDOI
Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization
TL;DR: The authors investigated the effect of scale on performance in the active money management industry and found that fund returns decline with lagged fund size, even after accounting for various performance benchmarks, suggesting that these adverse scale effects are related to liquidity.
Posted Content
On the Industry Concentration of Actively Managed Equity Mutual Funds
TL;DR: In this article, the authors studied the relation between industry concentration and the performance of actively managed US mutual funds from 1984 to 1999 and found that on average, more concentrated funds perform better after controlling for risk and style differences using various performance measures.
References
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Journal ArticleDOI
Common risk factors in the returns on stocks and bonds
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this article, the authors identify five common risk factors in the returns on stocks and bonds, including three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity.
Journal ArticleDOI
The Cross‐Section of Expected Stock Returns
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this paper, Bhandari et al. found that the relationship between market/3 and average return is flat, even when 3 is the only explanatory variable, and when the tests allow for variation in 3 that is unrelated to size.
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On Persistence in Mutual Fund Performance
TL;DR: Using a sample free of survivor bias, this paper showed that common factors in stock returns and investment expenses almost completely explain persistence in equity mutual fund's mean and risk-adjusted returns.
Journal ArticleDOI
Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
TL;DR: In this article, the authors show that strategies that buy stocks that have performed well in the past and sell stocks that had performed poorly in past years generate significant positive returns over 3- to 12-month holding periods.
Journal ArticleDOI
Multifactor Explanations of Asset Pricing Anomalies
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this article, the authors show that many of the CAPM average-return anomalies are related, and they are captured by the three-factor model in Fama and French (FF 1993).