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Active investment manager portfolios and preferences for stock characteristics
Author(s) -
Brands Simone,
Gallagher David R.,
Looi Adrian
Publication year - 2006
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.2006.00163.x
Subject(s) - capitalization , market capitalization , equity (law) , business , volatility (finance) , earnings , portfolio , growth stock , stock (firearms) , transaction cost , financial economics , stock market , economics , finance , restricted stock , mechanical engineering , paleontology , philosophy , linguistics , horse , political science , law , biology , engineering
The present study investigates the stock characteristic preferences of institutional Australian equity managers. In aggregate we find that active managers exhibit preferences for stocks exhibiting high‐price variance, large market capitalization, low transaction costs, value‐oriented characteristics, greater levels of analyst coverage and lower variability in analyst earnings forecasts. We observe stronger preferences for higher volatility, value stocks and wider analyst coverage among smaller stocks. We also find that smaller investment managers prefer securities with higher market capitalization and analyst coverage (including low variation in the forecasts of these analysts). We also document that industry effects play an important role in portfolio construction.