Informational advantage, attention allocation, and mutual fund performance

Abstract

This paper estimates a fund learning index based on an existing theoretical model to capture the attention allocation decisions of fund managers. This paper finds that low-learning-index funds, which allocate attention to portfolios with low information acquisition, outperform their high-learning-index counterparts by over 3% per year. Further studies show that the performance gap is driven by differences in informational advantage: Holding assets of low-learning-index funds are relatively undervalued, return spreads are larger in times of greater exploitable mispricing opportunities, and managers’ attention allocation decisions are persistent.

Date of Award	2022
Original language	English
Awarding Institution	The Hong Kong University of Science and Technology
Supervisor	Abhiroop MUKHERJEE (Supervisor)