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A skew is a skill: Portfolio skewness of mutual fund holdings

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  • Drienko, Jo
  • Gao, Chao
  • Liu, Yifei

Abstract

The return cross-section of a mutual fund’s portfolio holdings is positively skewed on average. At the fund level, portfolio skewness varies substantially across funds but remains highly persistent over time. We show that actively managed mutual funds with high portfolio skewness outperform funds with low skewness by 2.88% ($7.35 million) on an annualized basis. This association is not driven by past performance of portfolio holdings and becomes stronger amid more investment opportunities in the market. Further stock-level analyses reveal that shares added or tilted to by high skewness funds relative to low skewness funds significantly outperform their counterparts, pointing to stock selection skill as an explanation for both the portfolio skewness and its predictability of fund performance. In addition, funds with higher skewness attract higher inflows.

Suggested Citation

  • Drienko, Jo & Gao, Chao & Liu, Yifei, 2026. "A skew is a skill: Portfolio skewness of mutual fund holdings," Journal of Empirical Finance, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:empfin:v:85:y:2026:i:c:s0927539826000022
    DOI: 10.1016/j.jempfin.2026.101687
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    References listed on IDEAS

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    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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