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On the Industry Concentration of Actively Managed Equity Mutual Funds
Author(s) -
KACPERCZYK MARCIN,
SIALM CLEMENS,
ZHENG LU
Publication year - 2005
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.1540-6261.2005.00785.x
Subject(s) - business , mutual fund , equity (law) , fund of funds , portfolio , finance , closed end fund , investment style , monetary economics , economics , microeconomics , return on investment , open ended investment company , production (economics) , political science , market liquidity , law
Mutual fund managers may decide to deviate from a well‐diversified portfolio and concentrate their holdings in industries where they have informational advantages. In this paper, we study the relation between the industry concentration and the performance of actively managed U.S. mutual funds from 1984 to 1999. Our results indicate that, on average, more concentrated funds perform better after controlling for risk and style differences using various performance measures. This finding suggests that investment ability is more evident among managers who hold portfolios concentrated in a few industries.