Fund Performance, Managers’ Genuine Stock Selection Skills and Managerial Replacement: Evidence from the UK Unit Trust Industry

56 Pages Posted: 14 Jan 2010 Last revised: 28 Oct 2010

See all articles by Zhichao Zhang

Zhichao Zhang

Durham University - Durham Business School

Li Ding

Durham Business School

Si Zhou

Shanghai University

Date Written: January 30, 2010

Abstract

Using UK unit trusts data, we analyse the interplay among fund performance, flow changes, portfolio characteristics and managerial replacement. We find that managers with superior performance that is due to sample variation are more likely to be dismissed than are ‘unlucky’ managers indicating that many fund companies are not captivated by the ‘lucky’ managers’ extreme performance and willing to give ‘unlucky’ managers another chance. Furthermore, underperforming managers are more likely to be replaced in response to decreases in fund inflow than are outperforming managers. Managers' adjustment of portfolio components exerts mixed influence on the probability of replacement.

Keywords: Unit trusts, Fund performance, Managerial replacement, Genuine stock selection, Portfolio characteristics

Suggested Citation

Zhang, Zhichao and Ding, Li and Zhou, Si, Fund Performance, Managers’ Genuine Stock Selection Skills and Managerial Replacement: Evidence from the UK Unit Trust Industry (January 30, 2010). Finance and Corporate Governance Conference 2010 Paper, Available at SSRN: https://ssrn.com/abstract=1535829 or http://dx.doi.org/10.2139/ssrn.1535829

Zhichao Zhang

Durham University - Durham Business School ( email )

Mill Hill Lane
Durham, Durham DH1 3LB
United Kingdom

Li Ding

Durham Business School ( email )

Mill Hill Lane
Durham, Durham DH1 3LB
United Kingdom

Si Zhou (Contact Author)

Shanghai University ( email )

Room 522, Building 1,
Shanghai University,
Shanghai, Shanghai 20044
China

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