Active Fundamental Performance

Review of Financial Studies Forthcoming

56 Pages Posted: 14 Aug 2013 Last revised: 4 Oct 2018

See all articles by Hao Jiang

Hao Jiang

Michigan State University

Lu Zheng

University of California, Irvine - Paul Merage School of Business

Date Written: January 1, 2018


We propose a new measure, active fundamental performance (AFP), to identify skilled mutual fund managers. AFP evaluates fund investment skills conditioned on the release of firms’ fundamental information. For each fund, we examine the covariance between deviations of its portfolio weights from a benchmark portfolio and the underlying stock performance on days when firms publicize fundamental information. Because asset prices on these information days better reflect firm fundamentals, AFP can more effectively identify investment skills. From 1984 to 2014, funds in the top decile of high AFP subsequently outperformed those in the bottom decile by 2% to 3% per year.

Keywords: Mutual Funds, Performance Evaluation, Skill, Earnings Announcement

JEL Classification: G11, G20, G23

Suggested Citation

Jiang, Hao and Zheng, Lu, Active Fundamental Performance (January 1, 2018). Review of Financial Studies Forthcoming, Available at SSRN: or

Hao Jiang (Contact Author)

Michigan State University ( email )

315 Eppley Center
Department of Finance
East Lansing, MI 48824
United States


Lu Zheng

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States
9498248365 (Phone)

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