Does portfolio concentration affect performance? Evidence from corporate bond mutual funds

Qin, Nan; Wang, Ying

doi:10.1016/j.jbankfin.2020.106033

Cited by 8 publications

(5 citation statements)

References 44 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Literature has documented a positive relationship between portfolio performance and concentration (Hung et al. , 2020; Qin and Wang, 2021). Studies have discussed various elements affecting portfolio composition, skill and performance.…”

Section: Research Hypothesismentioning

confidence: 99%

“…However, literature on portfolio concentration has established a relationship between portfolio concentration and performance (Fulkerson and Riley, 2019; Fjesme, 2020; Hung et al. , 2020; Qin and Wang, 2021). For instance, Kacperczyk et al.…”

Section: Introductionmentioning

confidence: 99%

“…Along the same line, Fulkerson and Riley (2019) concluded that fund concentration increases the fund performance of US mutual funds. A bond markets mutual funds-based study (Qin and Wang, 2021) concluded a positive relationship between portfolio concentration and performance. However, few studies found that diversified funds performed better than concentrated funds.…”

Section: Introductionmentioning

confidence: 99%

“…Conventional wisdom and the modern portfolio hypothesis recommend that investors diversify their portfolios to reduce idiosyncratic risk. However, literature on portfolio concentration has established a relationship between portfolio concentration and performance (Fulkerson and Riley, 2019;Fjesme, 2020;Hung et al, 2020;Qin and Wang, 2021). For instance, Kacperczyk et al (2005) studied US mutual funds and found that industry-concentrated funds perform better than diversified ones.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Indian institutional investor's portfolio concentration decision: skill and performance

Pandey,

Sharma

2023

JAMR

View full text Add to dashboard Cite

PurposeThis study examined Indian institutional investors' holding data to understand their investment strategy (Portfolio Concentration/Diversification) and explored whether their skills were associated with their portfolio strategy and performance. The study introduced a new proxy to identify skilled investors by forecasting abnormal returns. Moreover, the study also highlighted where skilled Indian investors put their money for long-term investment.Design/methodology/approachThis study measures portfolio concentration based on the number of holdings, the Hirschman–Herfindahl index (HHI) and benchmarks adjusted industry concentration. The study introduced a new proxy to identify skilled investors. We measured Investors' performance with the help of Carhart's four factors model and examined the relationship between variables through various regression models.FindingsThe study concluded a negative relationship between portfolio concentration and performance. However, skilled Indian investors get rewards from portfolio concentration decisions. It was found that skilled investors with few stocks and an industry concentration in their portfolio show a positive association between concentration and fund performance. Additionally, this study found Indian investors showing their faith in the financial sector for long-term investment.Originality/valueThis study examined Indian institutional investors' portfolio concentration strategy and introduced a new proxy to measure investors' skills.

show abstract

Section: Research Hypothesismentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Indian institutional investor's portfolio concentration decision: skill and performance

Pandey,

Sharma

2023

JAMR

View full text Add to dashboard Cite

show abstract

“…Portfolio weight concentration has also been linked to better investment performance via the channel of geographical and cultural proximity (Fjesme, 2020). Finally, in the context of corporate bond mutual funds, Qin and Wang (2021) show that more concentrated corporate bond portfolios perform better and have more persistent performance. This was especially the case for investment-grade corporate bonds which are relatively more liquid than speculative-grade corporate bonds.…”

Section: Introductionmentioning

confidence: 98%

Portfolio weights concentration: optimal strategies and equilibrium implications

Glabadanidis

2022

IJMF

View full text Add to dashboard Cite

PurposeThe purpose of this article is to help investors build less-concentrated portfolios as well as to construct optimal return-concentration portfolios.Design/methodology/approachAn alternative portfolio objective is proposed where investors care about the level of concentration of their portfolio weights. Minimizing the concentration of portfolio weights leads to the well-known equal-weight portfolio as the optimal choice. Maximizing the trade-off between the portfolio's expected return and the weight concentration produces a novel portfolio with weights proportional to the expected return of each security.FindingsAn empirical application with 30 industry portfolios and 1,000 individual stocks finds that both proposed strategies perform well out-of-sample both in terms of the proposed concentration measure but also in terms of more traditional risk-based measures like Sharpe ratios, abnormal returns and market betas.Originality/valueThe optimal risk-concentration portfolio proposed in this paper is a novel result. The portfolio generalizes prior practitioner intuition on focusing on securities with the highest expected returns and the concept of diversification.

show abstract

How to Construct a Lower Risk FOF Based on Correlation Network? The Method of Principal Component Risk Parity Asset Allocation

Bai,

Zhang,

Liu

et al. 2023

J Syst Sci Complex

View full text Add to dashboard Cite

Does portfolio concentration affect performance? Evidence from corporate bond mutual funds

Cited by 8 publications

References 44 publications

Indian institutional investor's portfolio concentration decision: skill and performance

Indian institutional investor's portfolio concentration decision: skill and performance

Portfolio weights concentration: optimal strategies and equilibrium implications

How to Construct a Lower Risk FOF Based on Correlation Network? The Method of Principal Component Risk Parity Asset Allocation

Contact Info

Product

Resources

About