IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v46y2011i02p341-367_00.html
   My bibliography  Save this article

Holdings Data, Security Returns, and the Selection of Superior Mutual Funds

Author

Listed:
  • Elton, Edwin J.
  • Gruber, Martin J.
  • Blake, Christopher R.

Abstract

In this paper we show that selecting mutual funds using alpha computed from a fund’s holdings and security betas produces better future alphas than selecting funds using alpha computed from a time-series regression on fund returns. This is true whether future alphas are computed using holdings and security betas or a time-series regression on fund returns. Furthermore, we show that the more frequently the holdings data are available, the greater the benefit. This has major implications for the Securities and Exchange Commission’s recent ruling on the frequency of holdings disclosure and the information plan sponsors should collect from portfolio managers. We also explore the effect of conditioning betas on macroeconomic variables as suggested by Ferson and Schadt (1996) to identify superior-performing mutual funds as well as the alternative way of employing holdings data proposed by Grinblatt and Titman (1993).

Suggested Citation

  • Elton, Edwin J. & Gruber, Martin J. & Blake, Christopher R., 2011. "Holdings Data, Security Returns, and the Selection of Superior Mutual Funds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(2), pages 341-367, April.
    • Handle: RePEc:cup:jfinqa:v:46:y:2011:i:02:p:341-367_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0022109011000019/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anastasia Petraki & Anna Zalewska, 2017. "Jumping over a low hurdle: personal pension fund performance," Review of Quantitative Finance and Accounting, Springer, vol. 48(1), pages 153-190, January.
    2. Martin Lettau & Ananth Madhavan, 2018. "Exchange-Traded Funds 101 for Economists," Journal of Economic Perspectives, American Economic Association, vol. 32(1), pages 135-154, Winter.
    3. Victor DeMiguel & Javier Gil-Bazo & Francisco J. Nogales & André A. P. Santos, 2021. "Can Machine Learning Help to Select Portfolios of Mutual Funds?," Working Papers 1245, Barcelona School of Economics.
    4. Jing-Zhi Huang & Ying Wang, 2014. "Timing Ability of Government Bond Fund Managers: Evidence from Portfolio Holdings," Management Science, INFORMS, vol. 60(8), pages 2091-2109, August.
    5. Wayne Ferson & Junbo L Wang, 2021. "A Panel Regression Approach to Holdings-Based Fund Performance Measures [Multiperiod performance persistence analysis of hedge funds]," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 11(4), pages 695-734.
    6. DeMiguel, Victor & Gil-Bazo, Javier & Nogales, Francisco J. & Santos, André A.P., 2023. "Machine learning and fund characteristics help to select mutual funds with positive alpha," Journal of Financial Economics, Elsevier, vol. 150(3).
    7. Zheng, Yao & Osmer, Eric & Zu, Dingding, 2024. "Timing sentiment with style: Evidence from mutual funds," Journal of Banking & Finance, Elsevier, vol. 164(C).
    8. Zhe Chen & David R. Gallagher & Adrian D. Lee, 2017. "Testing the effect of portfolio holdings disclosure in an environment absent of mandatory disclosure," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57, pages 101-116, April.
    9. Ammann, Manuel & Cochardt, Alexander Elmar & Straumann, Simon & Weigert, Florian, 2022. "Back to the roots: Ancestral origin and mutual fund manager portfolio choice," CFR Working Papers 22-04, University of Cologne, Centre for Financial Research (CFR).
    10. Wang, Yaping & Paek, Miyoun & Ko, Kwangsoo, 2019. "The performance of Chinese equity funds: An extension of DGTW model," Japan and the World Economy, Elsevier, vol. 51(C), pages 1-1.
    11. Emawtee Bissoondoyal‐Bheenick & Robert Brooks & Hung Xuan Do, 2023. "Risk Analysis of Pension Fund Investment Choices," Abacus, Accounting Foundation, University of Sydney, vol. 59(3), pages 872-898, September.
    12. Choi, Jaewon & Kronlund, Mathias & Oh, Ji Yeol Jimmy, 2022. "Sitting bucks: Stale pricing in fixed income funds," Journal of Financial Economics, Elsevier, vol. 145(2), pages 296-317.
    13. Ferson, Wayne & Mo, Haitao, 2016. "Performance measurement with selectivity, market and volatility timing," Journal of Financial Economics, Elsevier, vol. 121(1), pages 93-110.
    14. Choi, Jaewon & Richardson, Matthew, 2016. "The volatility of a firm's assets and the leverage effect," Journal of Financial Economics, Elsevier, vol. 121(2), pages 254-277.
    15. Srinidhi Kanuri & Robert W. McLeod, 2016. "Sustainable competitive advantage and stock performance: the case for wide moat stocks," Applied Economics, Taylor & Francis Journals, vol. 48(52), pages 5117-5127, November.
    16. Elton, Edwin J. & Gruber, Martin J., 2013. "Mutual Funds," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1011-1061, Elsevier.
    17. Qifei Zhu, 2020. "The Missing New Funds," Management Science, INFORMS, vol. 66(3), pages 1193-1204, March.
    18. Elroi Hadad & Davinder Malhotra & Srinivas Nippani, 2024. "Trading commodity ETFs: Price behavior, investment insights, and performance analysis," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(7), pages 1257-1276, July.
    19. Li, Zhiyong & Rao, Xiao, 2023. "Exploring the zoo of predictors for mutual fund performance in China," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
    20. Y. Chung & Thomas Kim, 2015. "The win–loss ratio as an ability signal of mutual fund managers: a measure that is less influenced by luck," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 29(4), pages 301-335, November.
    21. Cao, Charles & Iliev, Peter & Velthuis, Raisa, 2017. "Style drift: Evidence from small-cap mutual funds," Journal of Banking & Finance, Elsevier, vol. 78(C), pages 42-57.
    22. Pankaj K. Agarwal & H. K. Pradhan, 2018. "Mutual Fund Performance Using Unconditional Multifactor Models: Evidence from India," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(2_suppl), pages 157-184, August.
    23. Scott Bennett & David R Gallagher & Graham Harman & Geoffrey J Warren & Lihui Xi, 2016. "Alpha generation in portfolio management: Long-run Australian equity fund evidence," Australian Journal of Management, Australian School of Business, vol. 41(1), pages 107-140, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:46:y:2011:i:02:p:341-367_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.