Alpha Generation in Portfolio Management: Long-Run Australian Equity Fund Evidence
Posted: 29 Jan 2016
Date Written: February 1, 2016
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 among active Australian managers using a more comprehensive sample, 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-oriented 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 among boutique firms relative to more institutionalized managers.
Keywords: active management, alpha generation, performance evaluation, portfolio holdings, trades
Suggested Citation: Suggested Citation