Publication Type
Journal Article
Version
submittedVersion
Publication Date
7-2012
Abstract
We analyze mutual fund industry selectivity — the performance of a fund’s industry allocation relative to the market. We find that industry selection accounts for a full third of fund performance based on two-digit SIC codes, with the remaining attributable to the performance of individual stocks relative to their own industries. We find that industry-selection skill drives persistence in relative performance, particularly over longer investment horizons. Unlike individual-stock-selection ability, industry selectivity is not eroded by increasing fund assets. Our results suggest that accounting for a manager’s ability to pick outperforming industries provides information beyond standard performance measures that can enhance a fund investor’s future performance.
Keywords
mutual funds, persistence, industry selection
Discipline
Finance and Financial Management
Research Areas
Finance
Publication
Review of Asset Pricing Studies
Volume
2
Issue
2
First Page
245
Last Page
274
ISSN
2045-9939
Identifier
10.1093/rapstu/ras004
Publisher
Oxford University Press
Citation
BUSSE, Jeffrey A. and TONG, Qing.
Mutual Fund Industry Selection and Persistence. (2012). Review of Asset Pricing Studies. 2, (2), 245-274.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/2956
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1093/rapstu/ras004