The Journal of Finance

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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Preferences for Stock Characteristics As Revealed by Mutual Fund Portfolio Holdings

Published: 03/01/1996   |   DOI: 10.1111/j.1540-6261.1996.tb05204.x

ERIC G. FALKENSTEIN

This investigation of the cross‐section of mutual fund equity holdings for the years 1991 and 1992 shows that mutual funds have a significant preference towards stocks with high visibility and low transaction costs, and are averse to stocks with low idiosyncratic volatility. These findings are relevant to theories concerning investor recognition, a potential agency problem in mutual funds, tests of trend‐following and herd behavior by mutual funds, and corporate finance.