Abstract

http://ssrn.com/abstract=1313411
 
 

References (19)



 
 

Citations (11)



 


 



When is Stock-Picking Likely to be Successful? Evidence from Mutual Funds


Ying Duan


University of Alberta - Department of Finance and Statistical Analysis

Gang Hu


Babson College, Finance Division

R. David McLean


University of Alberta - Department of Finance and Statistical Analysis

December 8, 2008

Financial Analysts Journal, Vol. 65, No. 2, pp. 55-66, 2009

Abstract:     
Consistent with a costly arbitrage equilibrium in which arbitrage costs insulate mispricing, this study finds that mutual fund managers have stock-picking ability for stocks with high idiosyncratic volatility but not for stocks with low idiosyncratic volatility. These findings suggest that fund managers and other investors may want to pay special attention to high-idiosyncratic-volatility stocks because they provide fertile ground for stock picking. The study also finds that the stock-picking ability of the average mutual fund manager declined after the extreme growth in the number of both mutual funds and hedge funds in the late 1990s.

Number of Pages in PDF File: 29

Keywords: mutual funds, insitutional investors, arbitage, limits of arbitrage, idiosyncratic risk, market efficiency

JEL Classification: G11, G14, G20, G23, G29

Accepted Paper Series


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Date posted: December 12, 2008 ; Last revised: January 27, 2013

Suggested Citation

Duan, Ying and Hu, Gang and McLean, R. David, When is Stock-Picking Likely to be Successful? Evidence from Mutual Funds (December 8, 2008). Financial Analysts Journal, Vol. 65, No. 2, pp. 55-66, 2009. Available at SSRN: http://ssrn.com/abstract=1313411

Contact Information

Ying Duan
University of Alberta - Department of Finance and Statistical Analysis ( email )
2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada

Gang Hu
Babson College, Finance Division ( email )
223 Tomasso Hall
Wellesley, MA 02457
United States
781-239-4946 (Phone)
HOME PAGE: http://faculty.babson.edu/ghu/
R. David McLean (Contact Author)
University of Alberta - Department of Finance and Statistical Analysis ( email )
School of Business
Edmonton, Alberta T6G 2R6
Canada
780-492-8005 (Phone)
780-492-3325 (Fax)
HOME PAGE: http://business.ualberta.ca/rdmclean
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