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Institutional capital allocation and equity returns: Evidence from Thai mutual funds’ holdings

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  • Ratanabanchuen, Roongkiat
  • Saengchote, Kanis

Abstract

Stocks that mutual funds buy tend to perform better than stocks that they sell. While this could be interpreted as evidence that managers are skilled at stock selection, we show that this may not be the case. Mutual fund managers tend to have preferences for particular types of stocks (e.g. large, liquid stocks, as documented in the U.S. by Gompers and Metrick, 2001). We show that Thai mutual funds prefer to invest in large cap, growth stocks and tend to buy same stocks they currently hold as they receive fund inflow. This can lead to abnormal returns for those stocks in the market. We relate our finding to the lack of the size premium and the existence of momentum premium in Thailand.

Suggested Citation

  • Ratanabanchuen, Roongkiat & Saengchote, Kanis, 2020. "Institutional capital allocation and equity returns: Evidence from Thai mutual funds’ holdings," Finance Research Letters, Elsevier, vol. 32(C).
    • Handle: RePEc:eee:finlet:v:32:y:2020:i:c:s1544612318307074
    DOI: 10.1016/j.frl.2018.12.033
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    Cited by:

    1. Kanis Saengchote & Jananya Sthienchoak, 2020. "Mutual Fund Participation in IPOs: Thai Evidence," PIER Discussion Papers 131, Puey Ungphakorn Institute for Economic Research.
    2. Chen, Rui & Ren, Jinjuan, 2022. "Do AI-powered mutual funds perform better?," Finance Research Letters, Elsevier, vol. 47(PA).
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    4. Saengchote, Kanis & Sthienchoak, Jananya, 2020. "Strategic participation in IPOs by affiliated mutual funds: Thai evidence," Pacific-Basin Finance Journal, Elsevier, vol. 63(C).
    5. Yao, Juan & Wu, Bochen & Gao, Yang, 2021. "Death and the life hereafter: A study of the subsequent hedge funds," Finance Research Letters, Elsevier, vol. 40(C).

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    More about this item

    Keywords

    Mutual funds returns; Asset pricing; Institutional ownership;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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