Article

Institutional investment management: An investor's perspective on the relation between turnover and performance

Published in: Investment Analysts Journal
Volume 47 , issue 2 , 2018 , pages: 81–94

DOI: 10.1080/10293523.2017.1414370

Author(s): Diego Víctor de Mingo-López Department of Finance and Accounting, Spain , Juan Carlos Matallín-Sáez Department of Finance and Accounting, Spain

Keywords: Mutual fund , performance , turnover , investor , Mutual fund , performance , turnover , investor

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Abstract

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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