Style drift

Evidence from small-cap mutual funds

Quanwei Cao, Peter G. Iliev, Raisa Velthuis

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper documents that small-cap mutual funds allocate on average 27% of their portfolio to mid- and large-cap stocks. We find that larger and older small-cap funds are more likely to hold mid- and large-cap stocks, consistent with funds straying from their objective over time. Funds that invest heavily in mid- and large-cap stocks expose their investors to unanticipated risks but investors do not experience higher abnormal returns or performance persistence overall. These funds did outperform their peers by 3% annually in the most recent period between January 2003 and March 2010.

Original languageEnglish (US)
Pages (from-to)42-57
Number of pages16
JournalJournal of Banking and Finance
Volume78
DOIs
StatePublished - May 1 2017

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Mutual funds
Investors
Performance persistence
Peers
Abnormal returns

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

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abstract = "This paper documents that small-cap mutual funds allocate on average 27{\%} of their portfolio to mid- and large-cap stocks. We find that larger and older small-cap funds are more likely to hold mid- and large-cap stocks, consistent with funds straying from their objective over time. Funds that invest heavily in mid- and large-cap stocks expose their investors to unanticipated risks but investors do not experience higher abnormal returns or performance persistence overall. These funds did outperform their peers by 3{\%} annually in the most recent period between January 2003 and March 2010.",
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Style drift : Evidence from small-cap mutual funds. / Cao, Quanwei; Iliev, Peter G.; Velthuis, Raisa.

In: Journal of Banking and Finance, Vol. 78, 01.05.2017, p. 42-57.

Research output: Contribution to journalArticle

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