Origins of Mutual Fund Skill: Market versus Accounting Based Asset Pricing Anomalies

Charlotte Christiansen, Ran Xing () and Yue Xu ()
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Ran Xing: Aarhus University and DFI, Postal: Department of Economics and Business Economics, Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Yue Xu: Aarhus University and CREATES, Postal: Department of Economics and Business Economics, Fuglesangs Allé 4, 8210 Aarhus V, Denmark

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We investigate the information source of active U.S. equity mutual funds’ value added using 234 public asset pricing anomalies. On average, mutual funds add value through their positive exposures to anomalies based on market information (e.g., momentum and liquidity risk) and lose value through their negative exposures to anomalies based on accounting information of firm fundamentals (e.g., investment and profitability), corroborating that both the semi-strong and weak forms of the efficient market hypothesis do not hold. We also find weak evidence that mutual funds profit from their private information, supporting the rejection of the strong form efficient market hypothesis.

Keywords: Mutual funds; Anomalies; Value added; Public information; Investment decisions (search for similar items in EconPapers)
JEL-codes: G11 G14 G23 (search for similar items in EconPapers)
Pages: 52
Date: 2020-12-10
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