Better to stay apart: asset commonality, bipartite network centrality, and investment strategies
Andrea Flori,
Fabrizio Lillo,
Fabio Pammolli (fabio.pammolli@polimi.it) and
Alessandro Spelta
Papers from arXiv.org
Abstract:
By exploiting a bipartite network representation of the relationships between mutual funds and portfolio holdings, we propose an indicator that we derive from the analysis of the network, labelled the Average Commonality Coefficient (ACC), which measures how frequently the assets in the fund portfolio are present in the portfolios of the other funds of the market. This indicator reflects the investment behavior of funds' managers as a function of the popularity of the assets they held. We show that $ACC$ provides useful information to discriminate between funds investing in niche markets and those investing in more popular assets. More importantly, we find that $ACC$ is able to provide indication on the performance of the funds. In particular, we find that funds investing in less popular assets generally outperform those investing in more popular financial instruments, even when correcting for standard factors. Moreover, funds with a low $ACC$ have been less affected by the 2007-08 global financial crisis, likely because less exposed to fire sales spillovers.
Date: 2018-11
References: Add references at CitEc
Citations:
Downloads: (external link)
http://arxiv.org/pdf/1811.01624 Latest version (application/pdf)
Related works:
Journal Article: Better to stay apart: asset commonality, bipartite network centrality, and investment strategies (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1811.01624
Access Statistics for this paper
More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators (help@arxiv.org).