Mutual Fund Screening versus Weighting

52 Pages Posted: 15 May 2018 Last revised: 15 Nov 2018

See all articles by Roman Skripnik

Roman Skripnik

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Date Written: September 9, 2018

Abstract

This paper develops a holdings-based measure of fund performance that distinguishes how fund managers weight stocks in their portfolios and how the managers screen the stocks they choose to hold. I find that screening decisions contribute negatively to the performance of a typical fund whereas portfolio weighting decisions contribute positively. In particular, screening decisions lower fund performance by 0.40% per year before costs whereas weighting decisions increase performance by 0.72% per year for a typical fund during 1980-2016. Even though the managers possess weighting ability, which in isolation suggests a skill of a manager, when I also consider the ability to pick which stocks to hold, the managerial skill is no longer present. My results also suggest that fund managers could improve their performance by following a benchmark closer in terms of holdings but not in terms of weights.

Keywords: Mutual Fund, Screening, Weighting

Suggested Citation

Skripnik, Roman, Mutual Fund Screening versus Weighting (September 9, 2018). Available at SSRN: https://ssrn.com/abstract=3172476 or http://dx.doi.org/10.2139/ssrn.3172476

Roman Skripnik (Contact Author)

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
60
rank
342,707
Abstract Views
235
PlumX Metrics