Investor sentiment and mutual fund stock picking

The active share of mutual funds drops significantly when investor sentiment is high, indicating that fund managers reduce their active stock selection and stay closer to their benchmarks during such periods. Our evidence is consistent with fund managers being sentiment-prone - challenging the conve...

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Bibliographic Details
Published in:Applied economics letters 2022-10, Vol.29 (17), p.1620-1625
Main Authors: Chue, Timothy K., Mian, G. Mujtaba
Format: Article
Language:English
Subjects:
active share
Economic analysis
Economic theory
Economics
Investor behavior
investor sentiment
Investors
Mutual fund
Mutual funds
Portfolio performance
Prices
Rates of return
stock picking
stock return
Stocks
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Summary:The active share of mutual funds drops significantly when investor sentiment is high, indicating that fund managers reduce their active stock selection and stay closer to their benchmarks during such periods. Our evidence is consistent with fund managers being sentiment-prone - challenging the conventional view that it is only the preponderance of retail investors during high sentiment periods that allows sentiment to influence asset prices.
ISSN:1350-4851
1466-4291
DOI:10.1080/13504851.2021.1951440