Active Technological Similarity and Mutual Fund Performance

Ping McLemore, Richard Sias, Chi Wan, H. Zafer Yüksel

Research output: Contribution to journalArticlepeer-review

Abstract

We examine whether superior understanding of technological innovation is a source of mutual fund managers' ability to garner positive abnormal returns. Consistent with our hypothesis, the inter-quintile annual net Carhart alpha spread for mutual funds sorted on changes in the technological similarity (TS) of their portfolio holdings is 282 basis points. Moreover, because changes in TS are largely orthogonal to other predictors of mutual fund success (e.g., industry concentration, active share, fund R 2, and lag fund alpha), changes in TS can be combined with other measures to help identify the best performing funds.

Original languageEnglish (US)
Pages (from-to)1862-1884
Number of pages23
JournalJournal of Financial and Quantitative Analysis
Volume57
Issue number5
DOIs
StatePublished - Aug 2 2022

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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