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On the Industry Concentration of Actively Managed Equity Mutual Funds

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  • MARCIN KACPERCZYK
  • CLEMENS SIALM
  • LU ZHENG

Abstract

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. Copyright 2005 by The American Finance Association.

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Bibliographic Info

Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 60 (2005)
Issue (Month): 4 (08)
Pages: 1983-2011

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Handle: RePEc:bla:jfinan:v:60:y:2005:i:4:p:1983-2011

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  1. Tobias J. Moskowitz & Mark Grinblatt, . "Do Industries Explain Momentum?," CRSP working papers 352, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
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  16. Robert Kosowski & Allan Timmermann & Russ Wermers & Hal White, 2006. "Can Mutual Fund "Stars" Really Pick Stocks? New Evidence from a Bootstrap Analysis," Journal of Finance, American Finance Association, vol. 61(6), pages 2551-2595, December.
  17. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
  18. Grinblatt, Mark & Titman, Sheridan, 1993. "Performance Measurement without Benchmarks: An Examination of Mutual Fund Returns," The Journal of Business, University of Chicago Press, vol. 66(1), pages 47-68, January.
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