A First Look at Mutual Funds That Use Short Sales

    Authors

    H. H. Chen; H. Desai;S. Krishnamurthy

    Comments

    Authors: contact us about adding a copy of your work at [email protected]

    Abbreviated Journal Title

    J. Financ. Quant. Anal.

    Keywords

    STOCK RETURNS; PICK STOCKS; HEDGE FUNDS; PERFORMANCE; INVESTMENT; RISK; INFORMATION; BENCHMARKS; MANAGERS; INDUSTRY; Business, Finance; Economics

    Abstract

    We provide a first look at short selling by mutual funds, a phenomenon not examined by prior research. Mutual funds that short do so frequently and in significant amounts, averaging about 16% of fund assets. These funds outperform benchmarks by 1.5% per year. An analysis of portfolio holdings shows that these funds generate abnormal performance from their short (4.1% per year) and long (1.5% per year) positions. Managers of short-selling mutual funds also exhibit superior performance in other funds they manage that do not use short sales. These findings suggest that managers of short-selling mutual funds are skilled.

    Journal Title

    Journal of Financial and Quantitative Analysis

    Volume

    48

    Issue/Number

    3

    Publication Date

    1-1-2013

    Document Type

    Article

    Language

    English

    First Page

    761

    Last Page

    787

    WOS Identifier

    WOS:000330462200004

    ISSN

    0022-1090

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