Style drift: Evidence from small-cap mutual funds

Charles Cao, Peter Iliev and Raisa Velthuis

Journal of Banking & Finance, 2017, vol. 78, issue C, 42-57

Abstract: This paper documents that small-cap mutual funds allocate on average 27% of their portfolio to mid- and large-cap stocks. We find that larger and older small-cap funds are more likely to hold mid- and large-cap stocks, consistent with funds straying from their objective over time. Funds that invest heavily in mid- and large-cap stocks expose their investors to unanticipated risks but investors do not experience higher abnormal returns or performance persistence overall. These funds did outperform their peers by 3% annually in the most recent period between January 2003 and March 2010.

Keywords: Mutual funds; Small-cap; Investment objectives; Style drift (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:78:y:2017:i:c:p:42-57

DOI: 10.1016/j.jbankfin.2017.01.009

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