A Concentration Analysis of Domestic Equity Mutual Funds

Abstract

This study examines the stock picking and market timing abilities for concentrated equity funds. We also investigate whether the characteristics of concentrated equity funds influence fund performance and whether these funds maintain performance persistence. The major results are as follows. Concentrated equity funds have superior stock picking abilities. The concentrated equity funds usually have larger scale effect. The expense rates of concentrated equity funds positively influence the fund performance, and these funds usually have smaller expense impact on fund performance than do diversified equity funds. The concentrated equity funds have a larger proportion of positive performance persistence.