publication . Article . 2013

Cash Holdings and Mutual Fund Performance

Mikhail Simutin;
Open Access
  • Published: 26 Aug 2013 Journal: Review of Finance, volume 18, issue 4, pages 1,425-1,464
Abstract
Cash holdings of equity mutual funds impose a drag on fund performance but also allow managers to make quick investments in attractive stocks and satisfy outflows without costly fire sales. This article shows that actively managed equity funds with high abnormal cash—that is, with cash holdings in excess of the level predicted by fund attributes—outperform their low abnormal cash peers by over 2% per year. Managers carrying high abnormal cash compensate for the low return on cash by making superior stock selection decisions, whereas less capable managers find abnormal cash costly and remain more fully invested in equities. Managers of high abnormal cash funds al...
Subjects
free text keywords: Cash and cash equivalents, Price/cash flow ratio, Cash flow forecasting, Cash flow, Cash management, Operating cash flow, Cash on cash return, Economics, Cash flow statement, Finance, business.industry, business
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publication . Article . 2013

Cash Holdings and Mutual Fund Performance

Mikhail Simutin;