Trading Behaviour and the Performance of Daily Institutional Trades

2004

SSRN Journal

Self Cite

Abstract:This study examines the relationship between investment performance and concentration in active equity portfolios. Active management is dependent on the success of two important components in the investment process -stock selection skill and portfolio management. Our study documents a positive relationship between fund performance and portfolio concentration. The relationship is stronger for stocks in which active managers hold overweight positions, as well as for stocks outside the largest 50 stocks listed on the Australian Stock Exchange (ASX). We find more concentrated funds tend to be those implementing growth styles, having smaller aggregate assets under management, being institutions which are not affiliated with a bank or life-office entity, whose funds experience past period outflows, and who are benchmarked to narrower indexes than the S&P/ASX 300. JEL classification: G23Keywords: Portfolio concentration, investment performance, tracking error, active funds _____________________________________________________________________ Abstract:This study examines the relationship between investment performance and concentration in active equity portfolios. Active management is dependent on the success of two important components in the investment process -stock selection skill and portfolio management. Our study documents a positive relationship between fund performance and portfolio concentration. The relationship is stronger for stocks in which active managers hold overweight positions, as well as for stocks outside the largest 50 stocks listed on the Australian Stock Exchange (ASX). We find more concentrated funds tend to be those implementing growth styles, having smaller aggregate assets under management, being institutions which are not affiliated with a bank or life-office entity, whose funds experience past period outflows, and who are benchmarked to narrower indexes than the S&P/ASX 300. JEL classification: G23

Section: Portfolio Concentration and Investment Manager Performancesupporting

confidence: 87%

mentioning

confidence: 98%

Portfolio Concentration and Investment Manager Performance

Brands¹,

Brown

2004

SSRN Journal

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“…Based on the size of the funds in terms of funds under management, the sample represents five of the top 10 Australian institutional fund managers, four ranked 11-20, five ranked 21-30 and the remainder are outside the largest 30 managers. A more detailed description of the database is available in Gallagher and Looi (2006) and Brands et al (2006). Comparison of the return on the funds in our sample and the broader population of investment funds provided by Mercer Investment Consulting showed that the two sets of returns were almost identical.…”

Section: Data and Sample Descriptionmentioning

confidence: 93%

Institutional Dividend Clienteles Under an Imputation Tax System

Jun

Partington

2010

Business Fin & Account

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Shareholdings for a sample of institutional equity funds, operating under the Australian imputation tax system, show that dividend policy and fund holdings are related. Relative to market benchmarks and ownership levels across firms, institutional funds are overweight in stocks that pay dividends. Among dividend-paying stocks there is no simple preference for high dividend yields, probably because the highest dividend yields are not sustainable. Instead we find an inverted U relationship between institutional ownership and dividend yield. The tax hypothesis dominates the prudent-man hypothesis in explaining ownership by institutional clienteles. Institutional funds have a higher ownership in stocks which carry full imputation tax credits compared to stocks which have partial, or zero, imputation tax credits.

“…13 The sample period for this study is 1 January 1993 to 31 December 2003. Further details concerning the construction and composition of the database can be obtained from Brown et al (2005), Gallagher and Looi (2006), and Foster et al (2005). These studies also…”

Section: A Datamentioning

confidence: 99%

The Use of Derivatives by Investment Managers and Implications for Portfolio Performance and Risk^*

Fong¹,

Ng³

2005

Int Rev Finance

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This study provides an empirical examination of derivative instruments used by institutional investors. Our analysis provides a unique insight into the role and benefits of derivative securities in active equity portfolio management. We contribute to the literature by using a database that comprises the periodic portfolio holdings and daily trades of institutional fund managers. The consequence of derivative use is analyzed using a number of performance and risk measures. Overall, we find the use of derivatives have a negligible impact on fund returns, and is primarily attributed to low levels of derivative exposure relative to total fund size. We also evaluate how derivatives are used by considering the trading strategies executed by active investment managers. Specifically, option trading patterns are consistent with the execution of momentum trading strategies. This study also documents that active investment managers prefer not to use options markets to engage in informed trading.