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New Positions in Mutual Fund Portfolios: Implications for Fund Alpha

Author

Listed:
  • Viktoriya Lantushenko

    (Saint Joseph’s University)

  • Edward Nelling

    (Drexel University)

Abstract

This study introduces a new measure of fund activeness that predicts future fund abnormal returns. This measure is defined as the “return on new portfolio holdings.” It is constructed as the return on stocks that a fund has not held before. We find that the return on these positions drives future fund alpha. On average, a one-standard deviation increase in the return on new holdings increases fund alpha by approximately 0.39 to 0.49 percent per year. Overall, our findings provide new insights on the value of active management.

Suggested Citation

  • Viktoriya Lantushenko & Edward Nelling, 2020. "New Positions in Mutual Fund Portfolios: Implications for Fund Alpha," Journal of Financial Services Research, Springer;Western Finance Association, vol. 58(2), pages 161-198, December.
    • Handle: RePEc:kap:jfsres:v:58:y:2020:i:2:d:10.1007_s10693-019-00329-1
    DOI: 10.1007/s10693-019-00329-1
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    References listed on IDEAS

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    More about this item

    Keywords

    Mutual funds; Institutional investors; Fund alpha;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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