Active Technological Similarity and Mutual Fund Performance
Date of Original Version
We examine whether superior understanding of technological innovation is a source of mutual fund managers' ability to garner positive abnormal returns. Consistent with our hypothesis, the inter-quintile annual net Carhart alpha spread for mutual funds sorted on changes in the technological similarity (TS) of their portfolio holdings is 282 basis points. Moreover, because changes in TS are largely orthogonal to other predictors of mutual fund success (e.g., industry concentration, active share, fund R 2, and lag fund alpha), changes in TS can be combined with other measures to help identify the best performing funds.
Publication Title, e.g., Journal
Journal of Financial and Quantitative Analysis
McLemore, Ping, Richard Sias, Chi Wan, and H. Z. Yüksel. "Active Technological Similarity and Mutual Fund Performance." Journal of Financial and Quantitative Analysis 57, 5 (2022). doi: 10.1017/S0022109021000685.