Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
961670 | Journal of Financial Markets | 2011 | 24 Pages |
Abstract
Capacity constraints limit the profits of some investment strategies, while other strategies are more scalable. We develop a dollar-weighted return measure that parses the factor timing by investors and a strategy's capacity constraints. We find that actively managed funds exhibit significant capacity and timing effects, while index funds display only timing effects. A portfolio's liquidity, investment style, and distribution policy are important in explaining variation in capacity constraints. The analysis demonstrates that capacity and timing effects are important in analyzing portfolio manager skill and the cost of active investing.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Conrad Ciccotello, Jason Greene, Leng Ling, David Rakowski,