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KAEA-VSS Empirical Macro-Finance
November 4, 2021 @ 8:00 pm - 9:30 pm EDT
Title: Exotic funds and the cross-section of stock returns
Presenter: Soohun Kim (KAIST)
Investment strategies of active funds vary in their reliance on characteristics versus exotic stock selection rules. We propose a simple machine learning methodology for estimating a strategy’s reliance on characteristics or exotic selections. We find stocks held by funds with more reliance on exotic selections outperform stocks held by funds with more reliance on characteristics. A strategy built around this out-performance earns a Fama-French 4-factor alpha of 3.1% per year (t-statistic of 3.39).
Zoom link to the seminar: