 Mutual Fund Stock†Picking Skill: New Evidence from Valuation†versus Liquidity†Motivated TradingMartin Rohleder, Dominik Schulte, Janik Syryca and Marco Wilkens Financial Management, 2018, vol. 47, issue 2, 309-347 Abstract: We propose a novel Trade Motivation Matrix that allows differentiating funds’ valuation†motivated (VM) and liquidity†motivated (LM) trades on single trade level. It thus enables analyses of stock†picking skill on three levels: trade, stock, and fund. On trade level, we find significant outperformance of VM buys and significant underperformance of VM sells, indicating manager stock†picking skills, especially during illiquid market periods. VM trades outperform LM trades, confirming negative performance effects due to flow risk, especially when market liquidity is low. On stock level, collective VM buying explains high future stock returns while collective VM selling is related to future losses, indicating wisdom of the crowd. On fund level, higher trading discretion, measured by a higher degree of VM trading, is observed for smaller, older funds holding higher cash buffers. Finally, higher trading discretion is related to higher future fund alpha, especially during illiquid times. Date: 2018 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:finmgt:v:47:y:2018:i:2:p:309-347 Ordering information: This journal article can be ordered from Access Statistics for this article Financial Management is currently edited by William G. Christie More articles in Financial Management from Financial Management Association International Contact information at EDIRC. |
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