Style drift: Evidence from small-cap mutual funds

Charles Cao, Peter Iliev, Raisa Velthuis

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

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

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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