Alpha Generation in Portfolio Management: Long-Run Australian Equity Fund Evidence
44 Pages Posted: 31 Aug 2012 Last revised: 2 Aug 2013
Date Written: August 29, 2012
This study provides the first long-run analysis of the skill of active Australian equity fund managers based on trades inferred from a market-wide database of monthly portfolio holdings over the period 1994-2009. In addition to confirming previous findings that skill exists amongst active Australian managers using a more comprehensive sample than previous studies, we also deepen the understanding of this skill in two ways. First, we sharpen the identification of skill by categorizing trades. We find that alpha is concentrated in trades that are more likely to involve informed trading rather than portfolio rebalancing. Second, we investigate skill across manager types. Alpha for growth-orientated managers is found to stem from selection skill, while that for value managers appears more related to characteristic exposure. We also find stronger evidence of skill amongst boutiques firms relative to more institutionalized managers.
Keywords: performance evaluation, active management, portfolio holdings, trades, alpha generation
JEL Classification: G23
Suggested Citation: Suggested Citation