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The (Mutual Fund) Imitation Game: On the Performance of 'Smart' Copycat Funds

Financial Innovation

Posted: 31 Oct 2017 Last revised: 17 Nov 2022

See all articles by Roberto Stein

Roberto Stein

University of Nebraska at Lincoln - Department of Finance

Date Written: October 4, 2022

Abstract

Using a novel measure of stock-level trade imitation, we uncover ‘smart’ copy- cats: fund managers that use their own information when beneficial, and otherwise imitate other managers’ better trades. Contrary to previous research, we find that these partial imitation strategies lead to outperformance. Our ‘Copycat Score’ com- bines the propensity to imitate and to lead trades. Funds at the high and low ends of the score outperform all others. The Copycat Score is persistent in time, related to other measures of skill, and a good predictor of fund performance. We conclude that smart copycatting is another skill of successful fund managers.

Keywords: copycat portfolios; mutual funds; portfolio holdings; fund performance; fund manager skill

JEL Classification: G21, G23

Suggested Citation

Stein, Roberto, The (Mutual Fund) Imitation Game: On the Performance of 'Smart' Copycat Funds (October 4, 2022). Financial Innovation, Available at SSRN: https://ssrn.com/abstract=3061898 or http://dx.doi.org/10.2139/ssrn.3061898

Roberto Stein (Contact Author)

University of Nebraska at Lincoln - Department of Finance ( email )

Lincoln, NE 68588-0490
United States

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