Cardiff University | Prifysgol Caerdydd ORCA
Online Research @ Cardiff 
WelshClear Cookie - decide language by browser settings

Fund manager conviction and investment performance

Jin, Liang, Taffler, Richard, Eshraghi, Arman ORCID: https://orcid.org/0000-0002-7406-1725 and Tosun, Onur ORCID: https://orcid.org/0000-0003-2551-1408 2020. Fund manager conviction and investment performance. International Review of Financial Analysis 71 , 101550. 10.1016/j.irfa.2020.101550

[thumbnail of Manuscript - Fund Manager Conviction and Investment Performance.pdf]
Preview
PDF - Accepted Post-Print Version
Download (1MB) | Preview

Abstract

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 fund manager conviction increases following both superior and, surprisingly, inferior past performance, and more so among solo-managed than team-managed funds. Second, and more importantly, we find an inverse-U relationship between conviction and subsequent performance. High levels of conviction proxied by high Active Share are associated with lower future returns and greater fund risk. Our study also illustrates an asymmetric investor reaction to fund manager conviction in the form of higher (lower) fund inflows rewarding good performance by high (low) conviction managers, but no pronounced penalties for poor performance, ceteris paribus.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Elsevier
ISSN: 1057-5219
Date of First Compliant Deposit: 2 October 2020
Date of Acceptance: 19 June 2020
Last Modified: 03 May 2023 16:49
URI: https://orca.cardiff.ac.uk/id/eprint/135268

Citation Data

Cited 1 time in Scopus. View in Scopus. Powered By Scopus® Data

Actions (repository staff only)

Edit Item Edit Item

Downloads

Downloads per month over past year

View more statistics