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Department of Applied Finance and Actuarial Studies

Seminar by Camille Schmidt

Research Seminars - business and economics
  • Topic: Portfolio Holdings Quality and Mutual Fund Performance
  • Speaker: Camille Schmidt, Capital Markets CRC Limited
  • Venue:
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This study investigates how the quality of stocks owned by mutual funds affects fund performance during the 20-year period 1990-2009. Funds which hold the lowest quality stocks exhibit significant underperformance; the evidence shows that stocks in the lowest decile of quality perform particularly poorly, with a mean monthly DGTW alpha of -1.11% (-12.58% p.a.). Furthermore, funds holding lower quality stocks have higher portfolio turnover, higher expenses and are slightly younger on average. The quality of a stock is positively related to its size, while quality is inversely related to volatility. Evidence of the downside protection offered by quality stocks in volatile market conditions is also examined.

View the full paper here - Portfolio Holdings Quality and Mutual Fund Performance(PDF)


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