Mutual Fund Industry Selection and Persistence

Jeffrey A. Busse and Qing Tong

The Review of Asset Pricing Studies, 2012, vol. 2, issue 2, 245-274

Abstract: We analyze mutual fund industry selectivity—the performance of a fund’s industry allocation relative to the market. We find that industry selection accounts for a full third of fund performance based on two-digit standard industrial classification (SIC) codes, with the remaining attributable to the performance of individual stocks relative to their own industries. More importantly, we find that industry-selection skill drives persistence in relative performance. Unlike stock-selection ability, industry selectivity is not eroded by increasing fund assets. Our results suggest that accounting for a manager’s ability to pick outperforming industries provides information beyond standard performance measures that can enhance a fund investor’s future performance.

JEL-codes: G11 G14 G23 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:rasset:v:2:y:2012:i:2:p:245-274.

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