The Anomalous Outperformance of Australian Small Company Fund Managers

dc.contributor.advisor Shen, Jianfeng Besley, Michael 2022-05-13T07:10:54Z 2022-05-13T07:10:54Z 2021 2022-05-13T05:11:57Z
dc.description.abstract Both industry and academic research document the sustained outperformance of Australian small capitalisation (cap) managers with regard to market benchmarks and standard academic models. In contrast to both their large company peers and overseas fund manager returns, the high relative returns generated by these small company managers have continued despite increased competition from new managers. This paper confirms the persistence of these anomalous returns and explores the sources of alpha generation by Australian small cap managers. The commonly used Carhart factor model does not explain the persistence of this alpha. Carhart alpha averages 0.3% per month for the group, with 22 out of 46 funds having statistically significant alphas. By adding a combination of factors to the standard Carhart model approximately two thirds of this alpha can be explained. These factors include betting against beta, avoidance of stocks with lottery characteristics, a preference for stocks with strong profitability and strong balance sheets while avoiding ‘junk’ stocks. After controlling for all these factors, average alpha declines to 0.08% per month with only four funds still having statistically significant alpha. While most managers avoid high beta and lottery stocks, the better performing funds demonstrate higher loadings away from lottery and distressed stocks and towards profitability factors than their poorer performing peers.
dc.language English
dc.language.iso en
dc.publisher UNSW, Sydney
dc.rights CC BY 4.0
dc.subject.other Small caps
dc.subject.other Australia
dc.subject.other Fund managers
dc.subject.other lottery stocks
dc.subject.other junk stocks
dc.subject.other alpha
dc.title The Anomalous Outperformance of Australian Small Company Fund Managers
dc.type Thesis
dcterms.accessRights embargoed access
dcterms.rightsHolder Besley, Michael
dspace.entity.type Publication
unsw.contributor.advisorExternal Karehnke, Paul; ESCP Business School 2024-05-13 2022-05-13
unsw.description.embargoNote Embargoed until 2024-05-13
unsw.relation.faculty Business School of Banking & Finance
unsw.subject.fieldofresearchcode 350202 Finance
unsw.thesis.degreetype Masters Thesis
Resource type