Information Content When Mutual Funds Deviate from Benchmarks
Erasmus University - Rotterdam School of Management
Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM); Netspar
IMC Financial Markets & Asset Management; Erasmus University - Rotterdam School of Management
December 1, 2011
AFA 2012 Chicago Meetings Paper
A stock-level measure that aggregates the over- and underweighting decisions of actively managed mutual funds strongly and positively predicts future stock returns. The return premium on stocks heavily overweighted by mutual funds, relative to their underweighted counterparts, reaches more than 7% per year even after adjustments for their loadings on the market, size, value, momentum, and liquidity factors. A significant portion of this premium occurs around corporate earnings announcements. These results point to an informational link between active mutual fund investing and asset prices.
Number of Pages in PDF File: 51
Keywords: Mutual Funds, Benchmarks, Private Information, Fund Performance
JEL Classification: G10, G11, G14, G23working papers series
Date posted: March 12, 2011 ; Last revised: December 13, 2011
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