Industry Concentration and Mutual Fund Performance

The article presents a study about the relationship between industry concentration and the performance of actively managed U.S. mutual funds from 1984 to 2003. It develops a new measure of industry concentration to quantify the amount of portfolio concentration in several industries. The results of the study show that controlling the risk and style differences using factor-based performance measures lead to a better performance of the most concentrated funds. This suggests that investment ability is more evident among managers with portfolios concentrated in a few industries

Industry Concentration and Mutual Fund Performance

The article presents a study about the relationship between industry concentration and the performance of actively managed U.S. mutual funds from 1984 to 2003. It develops a new measure of industry concentration to quantify the amount of portfolio concentration in several industries. The results of the study show that controlling the risk and style differences using factor-based performance measures lead to a better performance of the most concentrated funds. This suggests that investment ability is more evident among managers with portfolios concentrated in a few industries

Are the risk attitudes of professional investors affected by personal catastrophic experiences?

We adopt a novel empirical approach to show that the risk attitudes of professional investors are affected by their catastrophic experiences—even for catastrophes without any meaningful economic impact on these investors or their portfolio firms. We study the portfolio risk of U.S.‐based mutual funds that invest outside the United States before and after fund managers personally experience severe natural disasters. Using a difference‐in‐differences approach, we compare managers in disaster versus nondisaster counties matched on prior disaster probability and fund characteristics. We find that monthly fund return volatility decreases by roughly 60 basis points in year +1 and the effect disappears by year +3. Systematic risk drives the results. Additional analyses do not support wealth effects (using disasters with no property damage) or managerial agency, skill, and catering explanations