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Portfolio concentration and performance of institutional investors worldwide

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  • Choi, Nicole
  • Fedenia, Mark
  • Skiba, Hilla
  • Sokolyk, Tatyana

Abstract

Using data on security holdings for 10,771 institutional investors from 72 countries, we test whether concentrated investment strategies result in excess risk-adjusted returns. We examine several measures of portfolio concentration with respect to countries and industries and find that portfolio concentration is directly related to risk-adjusted returns for institutional investors worldwide. Results suggest, in contrast to traditional asset pricing theory and in support of information advantage theory, that concentrated investment strategies in international markets can be optimal.

Suggested Citation

  • Choi, Nicole & Fedenia, Mark & Skiba, Hilla & Sokolyk, Tatyana, 2017. "Portfolio concentration and performance of institutional investors worldwide," Journal of Financial Economics, Elsevier, vol. 123(1), pages 189-208.
    • Handle: RePEc:eee:jfinec:v:123:y:2017:i:1:p:189-208
    DOI: 10.1016/j.jfineco.2016.09.007
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    More about this item

    Keywords

    International investments; Institutional investors; Information advantage; Home bias; Diversification; Industry concentration;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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