Heterogeneous turnover-performance relations

Ke Shen, Lin Tong and Tong Yao

Journal of Banking & Finance, 2021, vol. 124, issue C

Abstract: We document the heterogeneous effects of turnover on mutual fund performance, which help explain the weak cross-sectional turnover-performance relations reported in existing studies. For funds skilled in exploiting short-term investment opportunities, there is a positive empirical relation between turnover and performance. For unskilled funds, the relation turns negative. As a result, performance persistence is stronger among funds with higher turnover. Further, we find that the heterogeneous effects of turnover on performance are not driven by liquidity premium or trade execution skills, but rather due to substantial dispersion in short-term stock selection information.

Keywords: Mutual funds; Portfolio turnover; Performance persistence (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:124:y:2021:i:c:s0378426621000121

DOI: 10.1016/j.jbankfin.2021.106054

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