Top Management Turnover: An Examination of Portfolio Holdings and Fund Performance

UNSW Working Paper No. 2004-13

45 Pages Posted: 25 Jan 2005

See all articles by Prashanthi Nadarajah

Prashanthi Nadarajah

University of New South Wales

Matt Pinnuck

University of Melbourne - Department of Accounting and Business Information Systems

David R. Gallagher

Rozetta Institute

Date Written: January 19, 2005

Abstract

We examine the performance and portfolio characteristics of actively managed equity funds impacted by top management turnover. Utilizing a unique database of monthly portfolio holdings, our study finds that post-replacement, previously poor performing funds experience improved returns. However this improved performance is not attributable to superior stock selection skill. We also find these new managers decrease the fund's reliance on momentum strategies and decrease the portfolio's concentration, which then leads to a reduced tracking error volatility. Prior to the replacement event, underperforming investment managers exhibit preferences for larger, growth-oriented stocks, as well as riding momentum strategies and increasing portfolio turnover.

Keywords: Top management turnover, portfolio holdings, fund performance

JEL Classification: G23

Suggested Citation

Nadarajah, Prashanthi and Pinnuck, Matthew and Gallagher, David R., Top Management Turnover: An Examination of Portfolio Holdings and Fund Performance (January 19, 2005). UNSW Working Paper No. 2004-13, Available at SSRN: https://ssrn.com/abstract=653462 or http://dx.doi.org/10.2139/ssrn.653462

Prashanthi Nadarajah

University of New South Wales

Kensington
High St
Sydney NSW 2052
Australia

Matthew Pinnuck

University of Melbourne - Department of Accounting and Business Information Systems ( email )

Victoria
Melbourne, Victoria 3010 3010
Australia

David R. Gallagher (Contact Author)

Rozetta Institute ( email )

Sydney

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