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The micro-determinants of portfolio gyrations in mutual funds: evidence from machine learning models

Author

Listed:
  • Fabrizio Ferriani

    (Bank of Italy)

  • Sabina Marchetti

    (Bank of Italy)

Abstract

We investigate the micro-determinants of portfolio gyrations in equity mutual funds that invest in emerging markets. Our analysis focuses on portfolio holding variations driven by asset managers' decisions, rather than by price revaluation, and matches this information with a comprehensive set of 54 stock-level characteristics. Using gradient boosting models (GBMs), we explore the non-linear relationships between stock characteristics and portfolio adjustments. Our findings show that firms' size and investment-related features, alongside equity stock attributes (e.g. market capitalization, traded volume, beta), are the most influential in explaining portfolio turnovers. Additionally, we provide evidence on how the relative importance of these characteristics shifts, based on sample partitions determined by market conditions (downturn vs recovery), investor type (institutional vs retail) and investment strategies (active vs passive).

Suggested Citation

  • Fabrizio Ferriani & Sabina Marchetti, 2025. "The micro-determinants of portfolio gyrations in mutual funds: evidence from machine learning models," Questioni di Economia e Finanza (Occasional Papers) 913, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_913_25
    as

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    References listed on IDEAS

    as
    1. Puy, Damien, 2016. "Mutual funds flows and the geography of contagion," Journal of International Money and Finance, Elsevier, vol. 60(C), pages 73-93.
    2. Anusha Chari & Karlye Dilts Stedman & Christian Lundblad & Andrew Karolyi, 2021. "Taper Tantrums: Quantitative Easing, Its Aftermath, and Emerging Market Capital Flows [Pricing the term structure with linear regressions]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1445-1508.
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    Keywords

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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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