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The Value of Active Mutual Fund Management: An Examination of the Stockholdings and Trades of Fund Managers

45 Pages Posted: 7 Jul 2000  

Narasimhan Jegadeesh

Emory University - Department of Finance

Hsiu-Lang Chen

University of Illinois at Chicago - Department of Finance

Russ Wermers

University of Maryland - Robert H. Smith School of Business

Abstract

We investigate the value of active mutual fund management by examining the stockholdings and trades of mutual funds. We find that stocks widely held by funds do not outperform other stocks. However, stocks purchased by funds have significantly higher returns than stocks they sell-this is true for large stocks as well as small stocks, and for value stocks as well as growth stocks. We find that growth-oriented funds exhibit better stock-selection skills than income-oriented funds. Finally, we find only weak evidence that funds with the best past performance have better stock-picking skills than funds with the worst past performance.

JEL Classification: G12

Suggested Citation

Jegadeesh, Narasimhan and Chen, Hsiu-Lang and Wermers, Russ, The Value of Active Mutual Fund Management: An Examination of the Stockholdings and Trades of Fund Managers. Journal of Financial and Quantitative Analysis. Available at SSRN: https://ssrn.com/abstract=224417 or http://dx.doi.org/10.2139/ssrn.224417

Narasimhan Jegadeesh

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States

Hsiulang Chen

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States
(312) 355-1024 (Phone)

Russell R. Wermers (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

Department of Finance
College Park, MD 20742-1815
United States
301-405-0572 (Phone)
301-405-0359 (Fax)

HOME PAGE: http://www.rhsmith.umd.edu/finance/rwermers/

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