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

74 Pages Posted: 27 Feb 2020 Last revised: 3 Feb 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: February 2, 2021

Abstract

We use textual analysis to construct a new measure that captures a mutual fund’s offshore exposure concentration through holding U.S. multinational firms. We find that funds with a higher offshore concentration index are associated with significantly better performance, with the difference in four-factor alpha between the top and bottom OCI deciles amounting to 2.95% per annum. Fund managers’ overweighing of firms with operations in certain countries can be partly attributed to their foreign ethnicity. Further analysis shows that high OCI funds have an information edge regarding firms’ fundamentals such as future earnings. Overall, our study suggests that fund managers have country-specific expertise and specialization, which is of particular importance in an era of globalization.

Keywords: Mutual funds, Manager Skill, Offshore Concentration, Fund Performance, Multinational Firms, Textual Analysis, Supervised Machine Learning

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 Mutual Fund Performance (February 2, 2021). 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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