Active Technological Similarity and Mutual Fund Performance

Journal of Financial and Quantitative Analysis (JFQA), Forthcoming

62 Pages Posted: 13 Jan 2021

See all articles by Ping McLemore

Ping McLemore

Federal Reserve Banks - Quantitative Supervision & Research

Richard W. Sias

University of Arizona - Department of Finance

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance

H. Zafer Yuksel

Texas A&M University Corpus Christi

Date Written: January 4, 2021

Abstract

We examine whether superior understanding of technological innovation is a source of mutual fund managers’ ability to garner positive abnormal returns. Consistent with our hypothesis, the inter-quintile annual net Carhart alpha spread for mutual funds sorted on changes in the technological similarity of their portfolio holdings is 282 basis points. Moreover, because changes in technological similarity are largely orthogonal to other predictors of mutual fund success (e.g., industry concentration, active share, fund R2, and lag fund alpha), changes in technological similarity can be combined with other measures to help identify the best performing funds.

Keywords: mutual fund performance, technological similarity, corporate innovation, active management

JEL Classification: G10, G14

Suggested Citation

McLemore, Ping and Sias, Richard W. and Wan, Chi and Yuksel, H. Zafer, Active Technological Similarity and Mutual Fund Performance (January 4, 2021). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3759414 or http://dx.doi.org/10.2139/ssrn.3759414

Ping McLemore

Federal Reserve Banks - Quantitative Supervision & Research ( email )

United States

Richard W. Sias (Contact Author)

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance ( email )

Boston, MA 02125
United States

H. Zafer Yuksel

Texas A&M University Corpus Christi ( email )

6300 ocean drive
corpus christi, TX TX 78414
United States

HOME PAGE: http://https://cob.tamucc.edu/About_Us/faculty_staff_directory.html

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
196
Abstract Views
625
rank
192,343
PlumX Metrics