Abstract

http://ssrn.com/abstract=566001
 
 

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Delegated Portfolios and Scope Characteristics


Eitan Goldman


Indiana University - Department of Finance

Xiyu (Thomas) Zhou


University of Alaska Fairbanks - School of Management (SOM)

June 2005


Abstract:     
In this paper, we demonstrate that the performance of actively-managed equity portfolios varies cross sectionally with several portfolio scope characteristics. In particular, we show that performance (as measured by Jensen's alpha) increases when a larger fraction of the portfolio is concentrated within the top ten asset holdings and when the portfolio is focused on a small number of sectors as measured by the Herfindahl Index of sector investment concentration. In addition, we find that performance increases with the number of securities held in the portfolio when the number of securities is small but that performance decreases once the number of securities held in the portfolio becomes large. We further demonstrate that these cross sectional results are robust to controlling for other portfolio and fund characteristics such as size, fees, turnover, and investment style. One possible interpretation of our findings is that portfolios that the management team finds more difficult to oversee and manage result in lower performance.

Number of Pages in PDF File: 31

Keywords: Performance, mutual-fund, information

JEL Classification: G11, G2

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Date posted: June 15, 2005  

Suggested Citation

Goldman, Eitan and Zhou, Xiyu (Thomas), Delegated Portfolios and Scope Characteristics (June 2005). Available at SSRN: http://ssrn.com/abstract=566001 or http://dx.doi.org/10.2139/ssrn.566001

Contact Information

Eitan Goldman (Contact Author)
Indiana University - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
812-856-0749 (Phone)
Xiyu (Thomas) Zhou
University of Alaska Fairbanks - School of Management (SOM) ( email )
P.O. Box 756080
Fairbanks, AK 99775-0500
United States
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