Trading Skills in Mutual Funds - Evidence from Daily Transactions

40 Pages Posted: 22 Jul 2020

See all articles by Rene Weh

Rene Weh

University of Augsburg - Department of Finance and Banking

P. Joakim Westerholm

University of Sydney Business School

Marco Wilkens

University of Augsburg

Juan Yao

University of Sydney - Business School - Finance Discipline; Financial Research Network (FIRN)

Date Written: May 29, 2020

Abstract

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

Weh, Rene and Westerholm, P. Joakim and Wilkens, Marco and Yao, Juan, Trading Skills in Mutual Funds - Evidence from Daily Transactions (May 29, 2020). Available at SSRN: https://ssrn.com/abstract=3638497 or http://dx.doi.org/10.2139/ssrn.3638497

Rene Weh (Contact Author)

University of Augsburg - Department of Finance and Banking ( email )

Universitaetsstr. 16
Augsburg, Bavaria 86159
Germany

P. Joakim Westerholm

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Marco Wilkens

University of Augsburg ( email )

Universitaetsstr. 16
Augsburg, 86159
Germany
+49 821 598 4124 (Phone)
+49 821 598 4223 (Fax)

HOME PAGE: http://www.wiwi.uni-augsburg.de/bwl/wilkens/team/wilkens_marco/

Juan Yao

University of Sydney - Business School - Finance Discipline ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
+61 2 93517650 (Phone)
+61 2 9351 6461 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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