Active investment manager portfolios and preferences for stock characteristics

Simone Brands*, David R. Gallagher, Adrian Looi

*Corresponding author for this work

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

The present study investigates the stock characteristic preferences of institutional Australian equity managers. In aggregate we find that active managers exhibit preferences for stocks exhibiting high-price variance, large market capitalization, low transaction costs, value-oriented characteristics, greater levels of analyst coverage and lower variability in analyst earnings forecasts. We observe stronger preferences for higher volatility, value stocks and wider analyst coverage among smaller stocks. We also find that smaller investment managers prefer securities with higher market capitalization and analyst coverage (including low variation in the forecasts of these analysts). We also document that industry effects play an important role in portfolio construction.

Original languageEnglish
Pages (from-to)169-190
Number of pages22
JournalAccounting and Finance
Volume46
Issue number2
DOIs
Publication statusPublished - Jun 2006
Externally publishedYes

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Keywords

  • stock preferences
  • managed fund performance
  • equity portfolio characteristics
  • market efficiency
  • tracking error

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