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Over-weighting risk factor augmented with mutual fund managers' social networks

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  • Li, Xing
  • Hou, Keqiang

Abstract

We construct over-weighting premium factors that are derived from mutual funds' major holding stocks in the Chinese stock markets. The over-weighting premium is calculated as the spread between the portfolio return of the most popular stocks held by the mutual funds and those of the least popular stocks. We further augment the over-weighting factor with social network of mutual fund managers to explain their over-weight behavior. The over-weighting factor with social network outperforms the simple over-weighting factor and dominates both the typical Fama-French three-factor model and Carhart four factor model for Chinese stock market.

Suggested Citation

  • Li, Xing & Hou, Keqiang, 2023. "Over-weighting risk factor augmented with mutual fund managers' social networks," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:pacfin:v:77:y:2023:i:c:s0927538x22002098
    DOI: 10.1016/j.pacfin.2022.101914
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    Cited by:

    1. Dachen Sheng & Heather A. Montgomery, 2024. "Does Herding and Anti-Herding Reflect Portfolio Managers’ Abilities in Emerging Markets?," Mathematics, MDPI, vol. 12(8), pages 1-28, April.

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