The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Is Money Smart? A Study of Mutual Fund Investors' Fund Selection Ability
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00131
Lu Zheng
A previous study finds evidence to support selection ability among active fund investors for equity funds listed in 1982. Using a large sample of equity funds, I find evidence that funds that receive more money subsequently perform significantly better than those that lose money. This effect is short‐lived and is largely but not completely explained by a strategy of betting on winners. In the aggregate, there is no significant evidence that funds that receive more money subsequently beat the market. However, it is possible to earn positive abnormal returns by using the cash flow information for small funds.
On the Industry Concentration of Actively Managed Equity Mutual Funds
Published: 08/12/2005 | DOI: 10.1111/j.1540-6261.2005.00785.x
MARCIN KACPERCZYK, CLEMENS SIALM, LU ZHENG
Mutual fund managers may decide to deviate from a well‐diversified portfolio and concentrate their holdings in industries where they have informational advantages. In this paper, we study the relation between the industry concentration and the performance of actively managed U.S. mutual funds from 1984 to 1999. Our results indicate that, on average, more concentrated funds perform better after controlling for risk and style differences using various performance measures. This finding suggests that investment ability is more evident among managers who hold portfolios concentrated in a few industries.
Tax‐Loss Selling and the January Effect: Evidence from Municipal Bond Closed‐End Funds
Published: 01/11/2007 | DOI: 10.1111/j.1540-6261.2006.01011.x
LAURA T. STARKS, LI YONG, LU ZHENG
This paper provides direct evidence supporting the tax‐loss selling hypothesis as an explanation of the January effect. Examining turn‐of‐the‐year return and volume patterns for municipal bond closed‐end funds, which are held mostly by tax‐sensitive individual investors, we document a January effect for these funds, but not for their underlying assets. We provide evidence that this effect can be largely explained by tax‐loss selling activities at the previous year‐end. Moreover, we find that funds associated with brokerage firms display more tax‐loss selling behavior, suggesting that tax counseling plays a role.