Stock-Picking by Mutual Funds: Evidence from Trading in Family-Controlled Firms

Jing Xie

No 202411, Working Papers from University of Macau, Faculty of Business Administration

Abstract: I uncover that equity mutual funds with significant investments in publicly traded family firms (pro-FF funds) exhibit superior performance compared to other funds. This effect is more pronounced when family firms are harder to value or less liquid. Pro-FF funds yield higher returns on family firm investments than other funds do on similar holdings. The net purchasing activities made by pro-FF funds have predictive power for future stock returns and earnings announcement surprises of family firms. One plausible explanation for this informational advantage lies in pro-FF funds focusing on family firms in closer geographical proximity. The positive impact of FF investment on fund performance holds for all three subsets of family firms that are managed by founders, descendants, or professional CEOs.

Keywords: Mutual funds; Informed trading; Family firms; Ownership Structure; Insiders (search for similar items in EconPapers)
JEL-codes: G11 G23 G32 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2024-06
New Economics Papers: this item is included in nep-cfn, nep-fmk and nep-sbm
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Published in UM-FBA Working Paper Series

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Persistent link: https://EconPapers.repec.org/RePEc:boa:wpaper:202411

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