Fund Manager Skill in an Era of Globalization: Offshore Concentration and Fund Performance

72 Pages Posted: 27 Feb 2020 Last revised: 10 Aug 2021

See all articles by John (Jianqiu) Bai

John (Jianqiu) Bai

Northeastern University - D'Amore-McKim School of Business

Yuehua Tang

University of Florida - Department of Finance

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance

H. Zafer Yuksel

Texas A&M University Corpus Christi

Date Written: July 5, 2021

Abstract

We study how mutual fund managers gain an edge in selecting stocks in an era of globalization. We use textual analysis to construct a measure that captures a mutual fund’s offshore exposure concentration through holding US multinational firms. We find that funds with a higher offshore concentration index (OCI) perform significantly better, with the difference in four-factor alpha between the top and bottom deciles amounting to 2.95% per annum. Fund managers’ overweighting of firms with operations in certain countries can be partly attributed to their foreign ethnicity. High OCI fund managers have an information advantage regarding firms’ fundamentals, such as earnings.

Keywords: Mutual Funds, Manager Skill, Offshore Concentration, Fund Performance, Multinational Firms, Textual Analysis

JEL Classification: G11, G23, J24

Suggested Citation

Bai, John (Jianqiu) and Tang, Yuehua and Wan, Chi and Yuksel, H. Zafer, Fund Manager Skill in an Era of Globalization: Offshore Concentration and Fund Performance (July 5, 2021). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3544394 or http://dx.doi.org/10.2139/ssrn.3544394

John (Jianqiu) Bai

Northeastern University - D'Amore-McKim School of Business ( email )

220 B RP
Boston, MA 02115
United States

Yuehua Tang (Contact Author)

University of Florida - Department of Finance ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

HOME PAGE: http://sites.google.com/site/yuehuatang

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance ( email )

Boston, MA 02125
United States

H. Zafer Yuksel

Texas A&M University Corpus Christi ( email )

6300 ocean drive
corpus christi, TX TX 78414
United States

HOME PAGE: http://https://cob.tamucc.edu/About_Us/faculty_staff_directory.html

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