Discussion Paper Details
Please find the details for DP13395 in an easy to copy and paste format below:
Title: Characteristics of Mutual Fund Portfolios: Where Are the Value Funds?
Author(s): Martin Lettau, Sydney C. Ludvigson and Paulo Manoel
Publication Date: December 2018
Keyword(s): Anomalies, Characteristics, Mutual funds, Portfolio composition and value puzzle
Programme Area(s): Financial Economics
Abstract: This paper provides a comprehensive analysis of portfolios of active mutual funds, ETFs and hedge funds through the lens of risk (anomaly) factors. We show that that these funds do not systematically tilt their portfolios towards profitable factors, such as high book-to-market (BM) ratios, high momentum, small size, high profitability and low investment growth. Strikingly, there are virtually no high-BM funds in our sample while there are many low-BM "growth" funds. Portfolios of "growth" funds are concentrated in low BM-stocks but "value" funds hold stocks across the entire BM spectrum In fact, most "value" funds hold a higher proportion of their portfolios in low-BM ("growth") stocks than in high-BM ("value") stocks. While there are some micro/small/mid-cap funds, the vast majority of mutual funds hold very large stocks. But the distributions of mutual fund momentum, profitability and investment growth are concentrated around market average with little variation across funds. The characteristics distributions of ETFs and hedge funds do not differ significantly from the those of mutual funds. We conclude that the characteristics of mutual fund portfolios raises a number of questions about why funds do not exploit well-known return premia and how their portfolio choices affects asset prices in equilibrium.
For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13395
Lettau, M, Ludvigson, S and Manoel, P. 2018. 'Characteristics of Mutual Fund Portfolios: Where Are the Value Funds?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13395