Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 554: Investment Strategies, Fund Performance and Portfolio Characteristics

Stefan Engström ()
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Stefan Engström: Dept. of Finance, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: This paper studies the relation between fund performance and the fund manager's investment strategy, which is based on the characteristics of the portfolio. The results show that neither momentum characteristics nor the valuation of stocks can explain differences in fund performance. However, the paper finds a negative firm-size effect that partly explains previous findings of a negative fund-size effect. Moreover, the results show a positive relation between performance and the degree of diversification within the fund portfolio. However, diversification by including non-listed stocks does not enhance performance.

Keywords: Diversification; Portfolio Evaluation; Investment Strategies; Momentum

JEL-codes: G11; G12; G23

28 pages, January 28, 2004

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