Heterogeneous Turnover-Performance Relations

51 Pages Posted: 17 Feb 2021

See all articles by Ke Shen

Ke Shen

Lehigh University - College of Business

Lin Tong

Fordham University - Finance Area

Tong Yao

University of Iowa - Henry B. Tippie College of Business

Date Written: January 6, 2021

Abstract

We document the heterogeneous effects of turnover on mutual fund performance, which help explain the weak cross-sectional turnover-performance relations reported in existing studies. For funds skilled in exploiting short-term investment opportunities, there is a positive empirical relation between turnover and performance. For unskilled funds, the relation turns negative. As a result, performance persistence is stronger among funds with higher turnover. Further, we find that the heterogeneous effects of turnover on performance are not driven by liquidity premium or trade execution skills, but rather due to substantial dispersion in short-term stock selection information.

Keywords: Mutual funds, Portfolio turnover, Performance persistence

JEL Classification: G23

Suggested Citation

Shen, Ke and Tong, Lin and Yao, Tong, Heterogeneous Turnover-Performance Relations (January 6, 2021). Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3761351

Ke Shen (Contact Author)

Lehigh University - College of Business ( email )

Bethlehem, PA 18015
United States
(610) 758-1084 (Phone)

Lin Tong

Fordham University - Finance Area ( email )

33 West 60th Street
New York, NY 10023
United States

Tong Yao

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States

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

Paper statistics

Downloads
29
Abstract Views
191
PlumX Metrics