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New mutual fund managers: Why do they alter portfolios?

Author

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  • Chou, De-Wai
  • Huang, Pei-Ching
  • Lai, Christine W.

Abstract

This study examines why a new fund manager changes the mutual fund holding portfolio of his or her predecessor immediately after management turnover. The study considers three possible explanations: private information, reputation concerns, and grace periods for new managers to sell underperforming stocks. Monthly data for the study come from a unique database of the Securities Investment Trust and Consulting Association in Taiwan over the period from 2004 to 2012. Both the regression models and the fuzzy-set qualitative comparative analysis (fsQCA) confirm that for the one-year period following a change of manager, portfolio turnover contributes to new managers' outperformance of their predecessors, thus supporting the private information hypothesis. However, for the three-month period following a change of manager, causal asymmetry occurs: portfolio turnover can lead to outperformance or underperformance outcomes, supporting the hypotheses of private information and successors' grace period.

Suggested Citation

  • Chou, De-Wai & Huang, Pei-Ching & Lai, Christine W., 2016. "New mutual fund managers: Why do they alter portfolios?," Journal of Business Research, Elsevier, vol. 69(6), pages 2167-2175.
    • Handle: RePEc:eee:jbrese:v:69:y:2016:i:6:p:2167-2175
    DOI: 10.1016/j.jbusres.2015.12.025
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    References listed on IDEAS

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