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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