EVALUATING ALTERNATIVE WEIGHTING SCHEMES FOR STOCKS IN A BEST IDEAS PORTFOLIO

Lynda S. Livingston

The International Journal of Business and Finance Research, 2010, vol. 4, issue 2, 117-136

Abstract: As institutional investors have become more aggressive in deploying their capital, fund managers have become more creative with their product offerings. In this paper, we consider a new institutional fund of mutual funds, a portfolio that combines the best-idea stocks from two underlying primary funds. The sponsor of this portfolio has chosen to weight all of the stocks equally, even those chosen by both of the underlying funds’ managers. However, stocks chosen by both managers may be more likely to outperform. We propose an alternative weighting scheme, where these confirmed stocks are weighted more heavily. We show that this overweighting strategy leads to a higher expected portfolio return than does the equally weighted scheme used by the sponsor.

Keywords: Funds-of-funds; Mutual Funds (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2010
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v4n2-2010/IJBFR-V4N2-2010-9.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibf:ijbfre:v:4:y:2010:i:2:p:117-136

Access Statistics for this article

The International Journal of Business and Finance Research is currently edited by Terrance Jalbert

More articles in The International Journal of Business and Finance Research from The Institute for Business and Finance Research
Bibliographic data for series maintained by Mercedes Jalbert ( this e-mail address is bad, please contact ).