The Value of Alpha Forecasts in Portfolio Construction

Kingsley Fong, Adrian D. Lee, David R. Gallagher, David R. Gallagher

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This study examines a portfolio strategy which selects stocks using the undisclosed monthly holdings of Australian active fund managers. When considering a large range of strategies incorporating fund portfolio holdings information, the top performing strategies are robust to data snooping and are both statistically significant and economically significant when incorporating transaction costs. These strategies are short term in nature, with statistically significant performance lasting up to nine months. When we account for look-ahead bias in the formation of a strategy, we find statistically significant alpha when following the best performing strategy holding 20 stocks or more in the previous month.

Original languageEnglish
Pages (from-to)97-121
Number of pages25
JournalAustralian Journal of Management
Volume34
Issue number1
DOIs
Publication statusPublished - 2009
Externally publishedYes

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