Selectivity in Mutual Fund Trades

28 Pages Posted: 23 Aug 2009

See all articles by Grant Cullen

Grant Cullen

Murdoch University

Dominic Gasbarro

Murdoch University

Gary S. Monroe

University of New South Wales (UNSW) - Australian School of Business

Kim-Song Le

Murdoch University

Date Written: August 21, 2009

Abstract

We examine fund-by-fund whether managers tilt their portfolios by purchasing stocks that appreciate while disposing stocks that depreciate. Using a unique method we identify statistically whether these managers exhibit selectivity in their trades. We find proportions of funds exhibiting good or perverse selectivity, while significant, are only marginally above random expectation, suggesting that luck rather than skill drives the result. As expected, funds which exhibit good selection outperform those that make poor stock selection, but the magnitude of this advantage varies according to investment style. Statistically, stock selection is only weakly persistent challenging selectivity based on skill as a widespread phenomenon.

Keywords: Mutual Fund, Selectivity

JEL Classification: G2, G11, G14, G23

Suggested Citation

Cullen, Grant Stewart and Gasbarro, Dominic and Monroe, Gary S. and Le, Kim-Song, Selectivity in Mutual Fund Trades (August 21, 2009). 22nd Australasian Finance and Banking Conference 2009, Available at SSRN: https://ssrn.com/abstract=1458864 or http://dx.doi.org/10.2139/ssrn.1458864

Grant Stewart Cullen

Murdoch University ( email )

Murdoch, WA 6150
Australia
618 9360 6026 (Phone)
618 9310 5004 (Fax)

Dominic Gasbarro

Murdoch University ( email )

South Street
Murdoch 6150, Western Australia
Australia

Gary S. Monroe

University of New South Wales (UNSW) - Australian School of Business ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia
+61293856443 (Phone)

Kim-Song Le (Contact Author)

Murdoch University ( email )

South Street
Murdoch 6150, Western Australia
Australia
61893602362 (Phone)
61893105004 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
71
Abstract Views
1,137
rank
391,474
PlumX Metrics