Concentration Effect On Mutual Fund Performance

The paper mainly examines asset allocation concentration effect on mutual fundperformance in China. The paper examines1649sets of semi-annual data from260equity open-end funds from2006to2012, and uses Jensen Alpha to evaluate mutualfund performance and industry concentration index, security concentration index tomeasure asset allocation concentration. Multivariate regression method and portfolioapproach are adopted in empirical analysis.After controlling for related mutual fund characteristics, results indicate thatfunds concentrated in relatively few securities or industries do in fact offer superiorperformance in Chinese market. In order to take time variation into consideration, thispaper divides the full sample period into3sub-periods according to the change ofmarket condition and still gets consistent result. This conclusion provides support tothe value of actively managed equity funds.