Origins of Mutual Fund Skill: Market versus Accounting Based Asset Pricing Anomalies

52 Pages Posted: 24 Jan 2021

See all articles by Charlotte Christiansen

Charlotte Christiansen

Aarhus University - CREATES

Ran Xing

Aarhus University; Danish Finance Institute

Yue Xu

Aarhus University

Date Written: December 3, 2020

Abstract

We investigate the information source of active U.S. equity mutual funds’ value added using 234 public asset pricing anomalies. On average, mutual funds add value through their positive exposures to anomalies based on market information (e.g., momentum and liquidity risk) and lose value through their negative exposures to anomalies based on accounting information of firm fundamentals (e.g., investment and profitability), corroborating that both the semi-strong and weak forms of the efficient market hypothesis do not hold. We also find weak evidence that mutual funds profit from their private information, supporting the rejection of the strong form efficient market hypothesis.

Keywords: Mutual funds; Anomalies; Value added; Public information; Investment decisions

JEL Classification: G11; G14; G23

Suggested Citation

Christiansen, Charlotte and Xing, Ran and Xu, Yue, Origins of Mutual Fund Skill: Market versus Accounting Based Asset Pricing Anomalies (December 3, 2020). Available at SSRN: https://ssrn.com/abstract=3742096 or http://dx.doi.org/10.2139/ssrn.3742096

Charlotte Christiansen

Aarhus University - CREATES ( email )

Fuglesangs Alle 4
Aarhus V, DK 8210
Denmark

Ran Xing

Aarhus University ( email )

Fuglesangs Allé 4
Aarhus V, 8210
Denmark

Danish Finance Institute ( email )

Yue Xu (Contact Author)

Aarhus University ( email )

Fuglesangs Allé 4
Aarhus V, 8210
Denmark
+4550234209 (Phone)

HOME PAGE: http://pure.au.dk/portal/en/persons/yue-xu(e729a6e2-295c-49d3-a414-4637c3ded356).html

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