This paper uses disclosed mutual fund portfolio holdings to develop stock selection models. Our models aggregate portfolio holdings across mutual funds, weighted by their past performance, to predict future stock returns – an overweighting by successful managers, or an underweighting by unsuccessful managers is considered to be a signal that a stock is currently underpriced. We find that invest...

This study provides novel evidence on the role of ambiguity aversion in determining the response of mutual fund investors to historical fund performance information. We present a model of ambiguity averse investors who receive multiple performance-based signals of uncertain precision about manager skill. A key implication of the model is that when investors receive multiple signals of uncertain...

I examine portfolio risk management implications of using hypothetical investment returns from a sample of mutual funds in a variety of investment objective classifications to select mutual funds. While early research supported this practice by showing that risk is homogeneous within investment objective groups and heterogeneous between groups, more recent research suggests that earlier finding...

If you had invested in an index mutual fund pegged to the Standard & Poors 500 at the beginning of 1990, you’d have done very well. But if you had invested in a fund consisting of companies that excel at customer management, your investment would have outperformed the Standard & Poors 500 by 300 percent! The lesson is clear: companies that actively manage and nurture their customer relationship...

We examine the form, adoption rates, and economic rationale for various mutual fund investment restrictions. A sample of U.S. domestic equity funds from 1994 to 2000 reveals systematic patterns in investment constraints, consistent with an optimal contracting equilibrium in the fund industry. Restrictions are more common when (i) boards contain a higher proportion of inside directors, (ii) the ...

Maximizing the profit and minimizing the loss notwithstanding the trend of the market is always desirable in any investment strategy. The present research develops an investment strategy, which has been verified effective in the real world, by employing self-organizing map neural network for mutual funds tracking the trends of stock market indices according to macroeconomics indicators and weig...

This paper documents the tendency of mutual fund managers to follow analyst recommendation revisions when they trade stocks, and the impact of analyst revisioninduced mutual fund “herds” on stock prices. We find that mutual fund herds follow consensus revisions in analyst recommendations, controlling for common investment signals that affect both analyst revisions and mutual fund trading. Conse...

This note reviews the literature on fund performance. A practical way of gauging market efficiency is to attempt to identify above-average risk-adjusted returns from one or more market participants that are the result of skill, as opposed to luck. If any such returns are identified, then the market is not efficient. In practice, such a test is best performed by seeking persistence in the return...