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Characteristics of mutual funds with extreme performance

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  • Berkowitz, Jason P.
  • Schorno, Patrick J.
  • Shapiro, Dmitry A.

Abstract

We focus on mutual fund characteristics associated with periods of extreme performance. We find that funds with either positive (hot-hand) or negative (icy-hand) persistence tend to have portfolio similarities consistent with riskier positions: compared to no-streak funds, they hold fewer stocks, invest more in top ten holdings, and have a higher portfolio beta. Also both hot-hand and icy-hand funds have significantly higher asset turnover than benchmark funds. Icy-hand funds tend to be more extreme with riskier positions and asset turnover than hot-hand funds. At the same time, icy-hand (hot-hand) funds tend to have larger (smaller) management teams, and are less (more) likely to be managed by one person. Finally, we do not observe many funds changing their management teams either before or after extreme performance. That is, we find no evidence that the beginning of an extreme performance period is associated with changes in management or that it induces changes in management.

Suggested Citation

  • Berkowitz, Jason P. & Schorno, Patrick J. & Shapiro, Dmitry A., 2017. "Characteristics of mutual funds with extreme performance," Review of Financial Economics, Elsevier, vol. 34(C), pages 50-60.
    • Handle: RePEc:eee:revfin:v:34:y:2017:i:c:p:50-60
    DOI: 10.1016/j.rfe.2017.04.003
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    More about this item

    Keywords

    Mutual funds; Extreme performance; Fund characteristics;
    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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