On Mutual Fund Investment Styles

We provide an exploratory investigation of mutual funds' investment styles. Funds' styles tend to cluster around a broad market benchmark. When funds deviate from the benchmark they are more likely to favor growth stocks with good past performance. There is some consistency in styles, although funds with poor past performance are more likely to change styles. Some evidence suggests that growth funds have better style-adjusted performance than value funds. The results are not sensitive to style identification procedure, but an approach based on fund portfolio characteristics performs better in predicting future fund returns.

Robust estimation of bacterial cell count from optical density

Optical density (OD) is widely used to estimate the density of cells in liquid culture, but cannot be compared between instruments without a standardized calibration protocol and is challenging to relate to actual cell count. We address this with an interlaboratory study comparing three simple, low-cost, and highly accessible OD calibration protocols across 244 laboratories, applied to eight strains of constitutive GFP-expressing E. coli. Based on our results, we recommend calibrating OD to estimated cell count using serial dilution of silica microspheres, which produces highly precise calibration (95.5% of residuals <1.2-fold), is easily assessed for quality control, also assesses instrument effective linear range, and can be combined with fluorescence calibration to obtain units of Molecules of Equivalent Fluorescein (MEFL) per cell, allowing direct comparison and data fusion with flow cytometry measurements: in our study, fluorescence per cell measurements showed only a 1.07-fold mean difference between plate reader and flow cytometry data

On Russell index reconstitution

This paper investigates whether abnormal returns permanently exist in transparent U.S. Russell index reconstitution and provides evidence to disentangle the competing hypotheses associated with the index effect in the literature. Additions to Russell 1000 generate cumulative excess returns of 10.9% from 2 days before May 31 to June 30 while stocks deleted from Russell 2000 Growth Index suffer cumulative loss of 6.6%. The effect of index reconstitution on stocks in the style switching groups is moderate while it is much smaller for stocks in the retention groups. Based on daily trading volume, there is evidence that money managers tied to Russell style indexes tend not to rebalance their portfolios actively until the time of index reconstitution to avoid tracking error. However, for stocks generating large excess returns, money managers trade them actively prior to the reconstitution. This study is supportive of the imperfect substitutes hypothesis in explaining the index effect, given the absence of complete reversal of the event period abnormal returns and of consistent improvement in liquidity for the index additions. In the joint test, the price pressure hypothesis and the liquidity hypothesis explain the marginal index effect at most by 0.12% and 3.05%, respectively, while the imperfect substitutes hypothesis explains it at least by 9.21%. Furthermore, the index effect is not purely driven by individual stock price momentum. Copyright Springer Science + Business Media, LLC 2006

Essay 1. Equity Style Identification. Essay 2. Equity Fund Performance Evaluation: The Importance of Fund Style. Essay 3. A Dynamic Model of Mutual Fund Managers' Investment Strategies

116 p.Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 1997.The third essay presents a continuous time model to describe the optimal investment strategy of money managers. A manager seeks the optimal skill level that has the best trade-off between the portfolio's expected return and its volatility of tracking error. When the time is close to the end of the assessment period, poor performers increase expected returns by raising skill levels but good performers reduce the volatility of returns by decreasing skill levels. In the comparative analyses, a lower skill level is chosen when the contribution to expected return per unit skill level is higher. When group securities is more volatile and thus the tracking error is not easily to be detected, a higher optimal skill level is utilized. Moreover, the convex compensation structure encourages fund managers to utilize higher optimal skill level at any given point in time.U of I OnlyRestricted to the U of I community idenfinitely during batch ingest of legacy ETD

Information Diffusion of Upstream and Downstream Industry-wide Earnings Surprises and Its Implications

This study presents new evidence that industry-wide earnings surprises indeed diffuse gradually across the supply chain at both industry and individual-firm levels. This evidence provides fundamental support for studies in the literature of gradual informationdiffusion, commonly using lagged returns as a proxy for information. To allow for the possibility that firms react differently to the industry-wide earnings surprises, this study measures how a stock’s returns respond to the part of its main customer or supplier industry’s lagged returns that are associated with earnings surprises. A long/short equity strategy by combining the firm’s response coefficient and the prior month’s main customer/supplier industry return is shown to be profitable. The strategy tends to select medium-sized firms across industries. Less-constrained firms are more likely to be in the winner portfolio and are better able to cope with industry shocks by riding on positive In and shielding themselves from negative ones