Origins of Mutual Fund Skill: Market versus Accounting Based Asset Pricing Anomalies
52 Pages Posted: 24 Jan 2021
Date Written: December 3, 2020
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: Suggested Citation