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The micro-determinants of portfolio allocation shifts in mutual funds: Evidence from machine learning models

Author

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  • Ferriani, Fabrizio
  • Marchetti, Sabina

Abstract

We examine the micro-determinants of portfolio allocation shifts in equity mutual funds investing in emerging markets. Focusing on portfolio adjustments driven by asset managers, we match mutual funds holdings data with 52 stock-level characteristics. Using gradient boosting models, we uncover non-linear relationships between stock characteristics and portfolio turnovers. Firm size, investment-related features, and equity attributes (e.g., market capitalization, volume, beta) are the most influential factors to explain portfolio turnovers. We also show that the importance of these characteristics shifts with market conditions (downturn vs. recovery), investor type (institutional vs. retail), and investment strategy (active vs. passive).

Suggested Citation

  • Ferriani, Fabrizio & Marchetti, Sabina, 2025. "The micro-determinants of portfolio allocation shifts in mutual funds: Evidence from machine learning models," Finance Research Letters, Elsevier, vol. 85(PB).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pb:s1544612325011936
    DOI: 10.1016/j.frl.2025.107935
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    References listed on IDEAS

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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