Earticle

초록

영어

A common belief about fund managers with superior performance is that they are more likely to succeed in stock selection with an informational advantage, far from diversifying their portfolio. Although some empirical studies support this view, it contradicts modern portfolio theory, in which well-diversified portfolios have higher returns. To address this inconsistency, this paper re-examines the effects of diversification by applying a comprehensive diversification measure, the diversification ratio (DR), to the actual mutual fund portfolio. Our results show that high-DR funds have more efficiently diversified portfolios than low-DR funds do and significantly higher risk-adjusted returns over a long period, consistent with theoretical predictions. Most importantly, we find a surprising positive relation between the DR and managerial skill measures such as Active Share, R-squared, and Industry concentration index. Considering both the portfolio weights and its correlation structure, we find that fund managers with superior skill have more concentrated portfolios, while their concentrated bets are less correlated with existing portfolios. Therefore, we suggest that deviating from the benchmark market index with concentrated investments is ultimately in line with the efficient construction of a diversified portfolio in terms of achieving superior performance. Consequently, our paper contributes to reconciling the conflicting empirical literature on the benefits of portfolio concentration with the diversification effect of modern portfolio theory.

목차

ABSTRACT
 1. Introduction
 2. Mutual fund data
 3. Diversification Ratio
 4. Performance of diversified funds
  4.1. Performance of DR-sorted fund portfolios
  4.2. Performance persistence of DR-sorted fund portfolios
  4.3. Persistence of the DR measure
  4.4. Cross-sectional regression
 5. Features of diversified funds
  5.1. Determinants of the DR
  5.2. Characteristics of DR-sorted fund portfolios
 6. Diversification and managerial skill
  6.1. Relation of diversification effects and skill measures
  6.2. Comparison of the DR and skill measures
 7. Conclusion
 References

키워드

저자

• Hoon Cho [ College of Business, Korea Advanced Institute of Science and Technology ]
• SangJin Park [ College of Business, Korea Advanced Institute of Science and Technology ] Corresponding author

참고문헌

발행기관

간행물

표지보기 관심저널 등록

• 간행물명

  한국재무학회 학술대회

• 간기

  부정기

• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330