The (Mutual Fund) Imitation Game: On the Performance of 'Smart' Copycat Funds
Posted: 31 Oct 2017 Last revised: 17 Nov 2022
Date Written: October 4, 2022
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: Suggested Citation