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Characteristics of mutual funds with extreme performance
Author(s) -
Berkowitz Jason P.,
Schorno Patrick J.,
Shapiro Dmitry A.
Publication year - 2017
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2017.04.003
Subject(s) - portfolio , global assets under management , asset (computer security) , business , fund of funds , asset management , monetary economics , finance , institutional investor , economics , computer science , computer security , market liquidity , corporate governance
We focus on mutual fund characteristics associated with periods of extreme performance. We find that funds with either positive (hot‐hand) or negative (icy‐hand) persistence tend to have portfolio similarities consistent with riskier positions: compared to no‐streak funds, they hold fewer stocks, invest more in top ten holdings, and have a higher portfolio beta. Also both hot‐hand and icy‐hand funds have significantly higher asset turnover than benchmark funds. Icy‐hand funds tend to be more extreme with riskier positions and asset turnover than hot‐hand funds. At the same time, icy‐hand (hot‐hand) funds tend to have larger (smaller) management teams, and are less (more) likely to be managed by one person. Finally, we do not observe many funds changing their management teams either before or after extreme performance. That is, we find no evidence that the beginning of an extreme performance period is associated with changes in management or that it induces changes in management.