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An Examination of the Performance of the Trades and Stock Holdings of Fund Managers: Further Evidence

Published online by Cambridge University Press:  06 April 2009

Matt Pinnuck
Matt Pinnuck
Affiliation:
mpinnuck@unimelb.edu.au, Department of Accounting, University of Melbourne, Parkville 3010, Australia.
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Abstract

Recent research has examined the performance of stocks held by U.S. mutual funds and found they realize abnormal returns. The result is significant as it stands in contrast to the general consensus from traditional performance studies that mutual funds do not possess superior information. Employing a unique dataset, I examine the performance of the monthly stock holdings and trades of a sample of Australian fund managers. When stock holdings are observable, performance measures can be constructed that are more precise than traditional fund manager performance measures. I find the stocks held by fund managers realize abnormal returns consistent with some stock selection ability across fund managers. Examining the performance of their individual trades, I find that the stocks they buy realize abnormal returns whereas for sell trades I find no evidence of abnormal returns. Overall, the results suggest fund managers have the ability to select stocks that realize positive abnormal returns thus providing out-of-sample support for similar recent findings for U.S. mutual funds.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 38 , Issue 4 , December 2003 , pp. 811 - 828
Copyright
Copyright © School of Business Administration, University of Washington 2003

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