Trading Skills in Mutual Funds - Evidence from Daily Transactions
40 Pages Posted: 22 Jul 2020
Date Written: May 29, 2020
Using a proprietary dataset of daily mutual fund trades, we document strong evidence of manager skills in the Finnish market for both buys and sells. We find that manager’s risk-adjusted outperformance lasts up to five days. Additionally, we find that the capital-weighted average of trade returns for bought stocks is positively correlated with funds’ net alphas. We explain fund performance with several stock and fund characteristics and document a positive correlation between the invested net capital in each trade and trading profits. These results show that mutual fund managers provide value to their clients through above par investment skills.
Keywords: Mutual funds, performance measurement, manager skill
JEL Classification: G11, G23
Suggested Citation: Suggested Citation