Forecasting Stock Returns Through an Efficient Aggregation of Mutual Fund Holdings
Year: 2012
Type: article
Abstract: We develop a stock return–predictive measure based on an efficient aggregation of the portfolio holdings of all actively managed U.S. domestic equity mutual funds, and use this model to study the source of fund managers' stock selection abilities. This “generalized inverse alpha” (GIA) approach reveals differences in the ability of managers to predict firms' future earnings from fundamental research. Notably, the GIA's return-forecasting power is not subsumed by publicly available quantitative predictors, such as momentum, value, and earnings quality, nor is it subsumed by methods shown in past research to forecast stock returns using fund holdings or trades.
Source: Review of Financial Studies
DOI: 10.1093/rfs/hhs111
Authors: Russ Wermers, Tong Yao, Jane Zhao
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3122819684