Active Investment Manager Portfolios and Preferences for Stock Characteristics

22 Pages Posted: 12 Jun 2006

See all articles by Simone Brands

Simone Brands

UNSW Australia Business School, School of Banking and Finance

David R. Gallagher

Rozetta Institute

Adrian Looi

UNSW Australia Business School, School of Banking and Finance

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Abstract

The present study investigates the stock characteristic preferences of institutional Australian equity managers. In aggregate we find that active managers exhibit preferences for stocks exhibiting high-price variance, large market capitalization, low transaction costs, value-oriented characteristics, greater levels of analyst coverage and lower variability in analyst earnings forecasts. We observe stronger preferences for higher volatility, value stocks and wider analyst coverage among smaller stocks. We also find that smaller investment managers prefer securities with higher market capitalization and analyst coverage (including low variation in the forecasts of these analysts). We also document that industry effects play an important role in portfolio construction.

Suggested Citation

Brands, Simone and Gallagher, David R. and Looi, Adrian, Active Investment Manager Portfolios and Preferences for Stock Characteristics. Accounting and Finance, Vol. 46, No. 2, pp. 169-190, June 2006, Available at SSRN: https://ssrn.com/abstract=906892 or http://dx.doi.org/10.1111/j.1467-629X.2006.00163.x

Simone Brands

UNSW Australia Business School, School of Banking and Finance

Sydney, NSW 2052
Australia

David R. Gallagher (Contact Author)

Rozetta Institute ( email )

Sydney

Adrian Looi

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

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