n Investment Analysts Journal - Institutional investment management : an investor’s perspective on the relation between turnover and performance

Volume 47 Number 2
  • ISSN : 1029-3523
  • E-ISSN: 2077-0227
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The main aim of this study is to analyse the relationship between turnover and performance in institutional investment management. For a sample of US equity mutual funds during the period January 1999–December 2014, we show that high-turnover funds do not beat low-turnover funds, since their performances are no different, or even significantly lower. Moreover, we show that investing in past high-turnover mutual funds provides investors with significantly worse results than investing in previously low-turnover funds. Investors aiming to enhance their risk-adjusted returns should therefore consider the turnover ratio level in their fund investment decisions.

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