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Making a Difference: European Mutual Funds Distinctiveness and Peers’ Performance

Author

Listed:
  • Sophie Béreau
  • Jean-Yves Gnabo
  • Henri Vanhomwegen

Abstract

Skilled managers of equity mutual funds can develop innovative strategies to outsmart their style peers. We unveil various causes of distinct investment strategies and test whether they enable to outperform peer competitors. We frame our paper in the context of European funds and propose a novel procedure for measuring and testing the impact of strategy distinctiveness that deals with endogenous style classification and sample noise in the comparison of peer performance. We find a strong, robust, and positive impact of strategy distinctiveness on financial performance. Yet, the marginal effect decreases with the level of distinctiveness.

Suggested Citation

  • Sophie Béreau & Jean-Yves Gnabo & Henri Vanhomwegen, 2020. "Making a Difference: European Mutual Funds Distinctiveness and Peers’ Performance," Finance, Presses universitaires de Grenoble, vol. 41(2), pages 7-51.
    • Handle: RePEc:cai:finpug:fina_412_0007
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    Keywords

    European equity mutual funds; distinctiveness; commonality; peer performance; adaptive clustering;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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