On the concentration of mutual fund portfolio holdings: evidence from Taiwan

Chen, Louisa and Lai, Yun-Ju (2014) On the concentration of mutual fund portfolio holdings: evidence from Taiwan. Research in International Business and Finance, 33. pp. 268-286. ISSN 0275-5319

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Abstract

This paper tests the alternative hypotheses of investment selection skills versus overconfidence of equity mutual funds managers in Taiwan. We find that fund holdings’ concentration levels are high and positively related to funds’ risk-adjusted returns in tranquil market periods; however, the concentration levels are low and more negatively related to risk-adjusted returns in turmoil market periods. The time varying concentration-performance relation is not driven by fund size. Our finding implies that fund managers have superior investment selection skills when the market is less volatile, but they exhibit overconfidence when the market is in turmoil, suggesting an investment strategy of shifting from concentrated funds to more broadly diversified funds when market condition becomes worse.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Business and Management
Depositing User: Joy Blake
Date Deposited: 24 Nov 2017 13:23
Last Modified: 24 Nov 2017 13:23
URI: http://sro.sussex.ac.uk/id/eprint/71548
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