Investment manager skill in small-cap equities

Publication Type:
Journal Article
Australian Journal of Management, 2010, 35 (1), pp. 23 - 49
Issue Date:
Filename Description Size
Thumbnail2008007483OK.pdf8.12 MB
Adobe PDF
Full metadata record
Using a representative sample of monthly portfolio holdings and daily trades, this study presents unique evidence of significant stock selection skill amongst institutional small-cap equity managers on a risk-adjusted basis. Of particular importance is the magnitude of the performance generated by fund managers in our sample. Aggregate four-factor and five-factor alphas are 68 and 59.6 basis points per month before management expenses and tax, respectively. The evidence from holdings and transaction-based metrics of performance also reveals that small-cap equity managers possess superior stock selection ability, from both a statistical and economic perspective. Our results are robust to the deduction of transaction costs. Our research provides important non-U.S. evidence concerning the value of active management, in a market segment which exhibits both lower liquidity and lower analyst coverage. © The Author(s) 2010.
Please use this identifier to cite or link to this item: