Portfolio Quality and Mutual Fund Performance
Copyright policy )Portfolio Quality and Mutual Fund Performance
AbstractThis study investigates how the quality of stocks owned by mutual funds affects the performance of those funds during 2000–2009. The quality of a stock is positively related to its size, while quality is inversely related to volatility. Evidently, stocks in the lowest quality decile perform particularly poorly amidst volatile market conditions with a mean monthly Daniel, Grinblatt, Titman and Wermers (DGTW) alpha 1.93% [25.73% per annum (pa)] less than high‐quality stocks. Furthermore, funds which hold the lowest quality stocks exhibit substantial underperformance, particularly during market downturns, with funds in the lowest decile of quality incurring a mean monthly DGTW alpha 0.96% (12.14% pa) lower than their higher quality counterparts. Interestingly, we discover a trend to funds investing in higher quality stocks over time.
- UNSW Sydney Australia
- Macquarie University Australia
- University of Wollongong Australia
- University of Queensland Australia
- Capital Markets Cooperative Research Centre Australia
Risk, Earnings Quality, Delisting Bias, Cross-Section, 2002 Economics and Econometrics, Stock-Picking Talent, Empirical Decomposition, 2003 Finance, Accruals Quality, Financial Statement Analysis, Business, Transactions Costs, Returns
Risk, Earnings Quality, Delisting Bias, Cross-Section, 2002 Economics and Econometrics, Stock-Picking Talent, Empirical Decomposition, 2003 Finance, Accruals Quality, Financial Statement Analysis, Business, Transactions Costs, Returns
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