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Preferences for Stock Characteristics As Revealed by Mutual Fund Portfolio Holdings
Author(s) -
FALKENSTEIN ERIC G.
Publication year - 1996
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1996.tb05204.x
Subject(s) - mutual fund , closed end fund , portfolio , business , open end fund , equity (law) , volatility (finance) , target date fund , mutual fund separation theorem , fund of funds , transaction cost , institutional investor , finance , financial economics , monetary economics , economics , corporate governance , market liquidity , political science , law
This investigation of the cross‐section of mutual fund equity holdings for the years 1991 and 1992 shows that mutual funds have a significant preference towards stocks with high visibility and low transaction costs, and are averse to stocks with low idiosyncratic volatility. These findings are relevant to theories concerning investor recognition, a potential agency problem in mutual funds, tests of trend‐following and herd behavior by mutual funds, and corporate finance.