This paper examines the role conviction plays in asset management and its relationship with investment returns. We measure the strength of fund manager conviction through a fund’s Active Share, i.e., the extent to which an investment portfolio differs from its benchmark index. First, we show...

A great deal of research effort has sought to understand whether fund managers have skill. However, most of this research draws inferences from fund returns attributable to funds that may have been managed by many different managers over the years. In this paper we focus on the fund manager. We...

We evaluate the performance of artificial intelligence (AI)-powered mutual funds. We find that these funds do not outperform the market per se. However, a comparison shows that AI-powered funds significantly outperform their human-managed peer funds. We further show that the outperformance of AI...

The majority of financial trades take place in open and highly regulated markets. As an alternative venue, large asset managers sometimes offset the trades of affiliated funds in an internal market, without relying on external facilities or supervision. In this paper, we employ institutional...

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...

We document a systematic seasonal component in the aggregate underperformance of active mutual funds. At the aggregate level, active funds underperform the market and other passive benchmarks only in the first month of a quarter. This intra-quarter performance seasonality holds across fund sizes...

Return-chasing investors almost exclusively consider top-performing funds for their investment decisions. When drawing conclusions about the managerial skill of these top performers, they tend to neglect fund volatility and the cross-sectional information contained in the number of funds and the...

We propose and test a methodological framework to examine the relation between mutual fund fees and return predictability. Gil-Bazo and Ruiz-Verdu (2009) drew attention to the puzzling fact that funds with worse before-fee performance charge higher fees. We make another contribution to the...

The paper builds on a simple yet novel idea that the way investors react to the recent mutual fund performance depends largely upon the long-term historical performance of that fund. In particular, I find that investors react more actively to the fund's recent performance in case of the funds...

We question the appropriateness of using time-invariant indices as benchmarks and propose a regime-switching methodology to identify the time-varying de facto benchmarks from a pool of the market-based indices, with or without a risk-free asset. We highlight the benchmark mismatch phenomenon and...