Journal of Financial and Quantitative Analysis Vol. 51 No. 3 2016

On the Style-Based Feedback Trading of Mutual Fund Managers

Bart Frijns¹; Aaron Gilbert¹; Remco C. J. Zwinkels²

¹ Auckland University of Technology · ² Amsterdam UMC Location Vrije Universiteit Amsterdam

Abstract

This paper examines the style-based feedback trading behavior of U.S. mutual fund managers. We provide an empirical version of Barberis and Shleifer’s style-switching model. We find style-based feedback trading for 77% of the funds, half of which is positive (negative) feedback trading. There is evidence for “twin style” switching, where capital is channeled between value and growth, and between large- and small-cap. Growth (value) funds apply more positive (negative) feedback trading. Funds that switch more aggressively are younger and have higher expense ratios. Finally, we find that positive (negative) feedback trading yields positive (negative) alpha.

DOI

10.1017/s0022109016000454

Volume

51

Issue

3

Pages

771-800

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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