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

58 Pages Posted: 27 Feb 2020

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

University of Massachusetts

Date Written: February 25, 2020

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 new measure that captures a mutual fund’s offshore exposure concentration through holding U.S. multinational firms. The proposed offshore concentration index (OCI) is distinct from existing measures of investment skills. More importantly, funds with a higher offshore concentration index are associated with significantly better fund 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. Our study uncovers an important source of fund manager skill, which is of particular importance in an era of globalization.

Keywords: Mutual funds, Manager Skill, Globalization, Offshore Concentration, Fund Performance

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 25, 2020). Available at SSRN: https://ssrn.com/abstract=3544394 or http://dx.doi.org/10.2139/ssrn.3544394

John (Jianqiu) Bai (Contact Author)

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

220 B RP
Boston, MA 02115
United States

Yuehua Tang

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

University of Massachusetts ( email )

100 Morrissey Blvd.
M-5-257
Boston, MA Boston 02125
United States
6172877671 (Phone)

HOME PAGE: http://www.zafer.yuksel.com

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
43
Abstract Views
285
PlumX Metrics