Gross profitability and mutual fund performance

David Kenchington, Chi Wan, H. Zafer Yüksel

Research output: Contribution to journalArticle

Abstract

We find that mutual funds holding a larger concentration of high gross profitability stocks generate better future performance. The outperformance of these funds is not driven by a profitability-related risk premium and is not a byproduct of fund managers’ exploitation of other well-known investment strategies. We show that fund managers who trade on the gross profitability anomaly possess greater skill and create value by attracting future fund inflows and by growing fund assets under management. We contribute to both the mutual fund and market anomaly literatures by providing strong evidence that a sizable subset of mutual fund managers profit from an important market anomaly.

Original languageEnglish (US)
Pages (from-to)31-49
Number of pages19
JournalJournal of Banking and Finance
Volume104
DOIs
StatePublished - Jul 1 2019

Fingerprint

Mutual funds
Fund managers
Profitability
Mutual fund performance
Market anomalies
Fundholding
Exploitation
Anomaly
Investment strategy
By-products
Assets
Profit
Risk premium

Keywords

  • Active fund management
  • Gross profitability anomaly
  • Mutual funds

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Gross profitability and mutual fund performance. / Kenchington, David; Wan, Chi; Yüksel, H. Zafer.

In: Journal of Banking and Finance, Vol. 104, 01.07.2019, p. 31-49.

Research output: Contribution to journalArticle

Kenchington, David ; Wan, Chi ; Yüksel, H. Zafer. / Gross profitability and mutual fund performance. In: Journal of Banking and Finance. 2019 ; Vol. 104. pp. 31-49.
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