Persistent Link:
http://hdl.handle.net/10150/195297
Title:
Essays on Mutual Funds
Author:
Zhao, Jianghong
Issue Date:
2006
Publisher:
The University of Arizona.
Rights:
Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
Abstract:
The first essay examines the relation between fund performance and stock selection process. I classify mutual funds into two groups according to their distinctive stock selection approaches: tire kickers who rely on fund managers' personal judgment and fundamental analysis to pick stocks, and quant jocks who use computer-based models to select stocks. I examine how the stock selection approach affects mutual fund performance and economies of scale. I document an increasing trend of quantitative techniques used by mutual funds, in addition to some unique characteristics of quant jocks. Quant jocks and tire kickers have similar factor-adjusted alphas, but quant jocks have higher Sharpe ratios. Quant jocks tend to be much smaller than tire kickers. I explore possible explanations for the size difference. I find that although quant jocks can cheaply screen a large universe of stocks, the stocks that quant jocks invest in are smaller and less liquid, which results in higher transaction costs and limited scalability of quantitative investment strategies. The second essay investigates mutual fund managers' private information about future stock returns as revealed in their portfolio holdings. Specifically, we develop three different stock alpha estimators to predict stock returns based on portfolio compositions and past performance of mutual funds. We find that investment strategies based on our stock alpha estimators perform well, when using information on recent fund holdings and fund purchases. This evidence suggests that fund managers' stock selection skills are quite persistent, and vary widely in the cross-section. We also compare our strategies with 12 quantitative investment signals based on market anomalies, and find that our strategies are not subsumed by these quantitative signals. Thus, our stock alpha estimators reflect private skills of active fund managers that are unrelated to known anomalies. Finally, we develop a conditional stock alpha estimator using information on stock characteristics and fund characteristics. Investment strategies based on the conditional stock alphas deliver further improved performance.
Type:
text; Electronic Dissertation
Keywords:
Stock selection; quant jock; tire kicker; portfolio disclosure
Degree Name:
PhD
Degree Level:
doctoral
Degree Program:
Management; Graduate College
Degree Grantor:
University of Arizona
Advisor:
Lamoureux, Chris
Committee Chair:
Lamoureux, Chris

Full metadata record

DC FieldValue Language
dc.language.isoENen_US
dc.titleEssays on Mutual Fundsen_US
dc.creatorZhao, Jianghongen_US
dc.contributor.authorZhao, Jianghongen_US
dc.date.issued2006en_US
dc.publisherThe University of Arizona.en_US
dc.rightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.en_US
dc.description.abstractThe first essay examines the relation between fund performance and stock selection process. I classify mutual funds into two groups according to their distinctive stock selection approaches: tire kickers who rely on fund managers' personal judgment and fundamental analysis to pick stocks, and quant jocks who use computer-based models to select stocks. I examine how the stock selection approach affects mutual fund performance and economies of scale. I document an increasing trend of quantitative techniques used by mutual funds, in addition to some unique characteristics of quant jocks. Quant jocks and tire kickers have similar factor-adjusted alphas, but quant jocks have higher Sharpe ratios. Quant jocks tend to be much smaller than tire kickers. I explore possible explanations for the size difference. I find that although quant jocks can cheaply screen a large universe of stocks, the stocks that quant jocks invest in are smaller and less liquid, which results in higher transaction costs and limited scalability of quantitative investment strategies. The second essay investigates mutual fund managers' private information about future stock returns as revealed in their portfolio holdings. Specifically, we develop three different stock alpha estimators to predict stock returns based on portfolio compositions and past performance of mutual funds. We find that investment strategies based on our stock alpha estimators perform well, when using information on recent fund holdings and fund purchases. This evidence suggests that fund managers' stock selection skills are quite persistent, and vary widely in the cross-section. We also compare our strategies with 12 quantitative investment signals based on market anomalies, and find that our strategies are not subsumed by these quantitative signals. Thus, our stock alpha estimators reflect private skills of active fund managers that are unrelated to known anomalies. Finally, we develop a conditional stock alpha estimator using information on stock characteristics and fund characteristics. Investment strategies based on the conditional stock alphas deliver further improved performance.en_US
dc.typetexten_US
dc.typeElectronic Dissertationen_US
dc.subjectStock selectionen_US
dc.subjectquant jocken_US
dc.subjecttire kickeren_US
dc.subjectportfolio disclosureen_US
thesis.degree.namePhDen_US
thesis.degree.leveldoctoralen_US
thesis.degree.disciplineManagementen_US
thesis.degree.disciplineGraduate Collegeen_US
thesis.degree.grantorUniversity of Arizonaen_US
dc.contributor.advisorLamoureux, Chrisen_US
dc.contributor.chairLamoureux, Chrisen_US
dc.contributor.committeememberJiang, Georgeen_US
dc.contributor.committeememberOaxaca, Ronald L.en_US
dc.contributor.committeememberYao, Tongen_US
dc.identifier.proquest1657en_US
dc.identifier.oclc137356235en_US
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