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Selectivity, Style, Sentiment and Skill in Mutual Fund Trades

27 Pages Posted: 24 Aug 2010  

Grant Cullen

Murdoch University

Dominic Gasbarro

Murdoch University

Kim-Song Le

Murdoch University

Gary S. Monroe

University of New South Wales (UNSW) - Australian School of Business

Date Written: August 20, 2010

Abstract

Fund managers can only exhibit selectivity through purchasing (selling) stocks that appreciate (depreciate) more frequently than expected from random occurrence, if stocks are incorrectly priced. We develop a method that can statistically identify fund managers that exhibit net, buy, and sell selectivity in their trades, as well as distinguish manager skill from fortuitous stock selection. Stock investor sentiment betas are calculated from the recently developed investor sentiment index, and used to indicate stock mispricing. We find that superior stock selection is concentrated in funds that hold high sentiment beta stocks; the major constituent of funds with the aggressive growth objective.

Keywords: Mutual fund, selectivity, investment style, investor sentiment, persistence

JEL Classification: G2, G11, G14, G23

Suggested Citation

Cullen, Grant and Gasbarro, Dominic and Le, Kim-Song and Monroe, Gary S., Selectivity, Style, Sentiment and Skill in Mutual Fund Trades (August 20, 2010). 23rd Australasian Finance and Banking Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1663112 or http://dx.doi.org/10.2139/ssrn.1663112

Grant Stewart Cullen

Murdoch University ( email )

Murdoch, WA 6150
Australia
618 9360 6026 (Phone)
618 9310 5004 (Fax)

Dominic Gasbarro

Murdoch University ( email )

South Street
Murdoch 6150, Western Australia
Australia

Kim-Song Le (Contact Author)

Murdoch University ( email )

South Street
Murdoch 6150, Western Australia
Australia
61893602362 (Phone)
61893105004 (Fax)

Gary S. Monroe

University of New South Wales (UNSW) - Australian School of Business ( email )

Sydney, NSW 2052
Australia
+61293856443 (Phone)

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