Gross profitability and mutual fund performance

David Kenchington, Chi Wan and H. Zafer Yüksel

Journal of Banking & Finance, 2019, vol. 104, issue C, 31-49

Abstract: We find that mutual funds holding a larger concentration of high gross profitability stocks generate better future performance. The outperformance of these funds is not driven by a profitability-related risk premium and is not a byproduct of fund managers’ exploitation of other well-known investment strategies. We show that fund managers who trade on the gross profitability anomaly possess greater skill and create value by attracting future fund inflows and by growing fund assets under management. We contribute to both the mutual fund and market anomaly literatures by providing strong evidence that a sizable subset of mutual fund managers profit from an important market anomaly.

Keywords: Gross profitability anomaly; Mutual funds; Active fund management (search for similar items in EconPapers)
JEL-codes: G10 G11 G14 G23 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:104:y:2019:i:c:p:31-49

DOI: 10.1016/j.jbankfin.2019.05.001

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