Investment manager skill in small-cap equities
Using a representative sample of monthly portfolio holdings and daily trades, this study presents unique evidence of significant stock selection skill amongst institutional small-cap equity managers on a risk-adjusted basis. Of particular importance is the magnitude of the performance generated by fund managers in our sample. Aggregate four-factor and five-factor alphas are 68 and 59.6 basis points per month before management expenses and tax, respectively. The evidence from holdings and transaction-based metrics of performance also reveals that small-cap equity managers possess superior stock selection ability, from both a statistical and economic perspective. Our results are robust to the deduction of transaction costs. Our research provides important non-U.S. evidence concerning the value of active management, in a market segment which exhibits both lower liquidity and lower analyst coverage
Year of publication: |
2010
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Authors: | Chen Cong ; Comerton-Forde Carole ; Gallagher David ; Walter Terry |
Publisher: |
Australian Graduate School of Management |
Saved in:
freely available
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