Seminar by Camille Schmidt
- Topic: Portfolio Holdings Quality and Mutual Fund Performance
- Speaker: Camille Schmidt, Capital Markets CRC Limited
- When: 7th September, 2012, (Fri)
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.