Portfolio selection, diversification and fund-of-funds: a note

The present paper examines the performance and diversification properties of active Australian equity fund‐of‐funds (FoF). Simulation analysis is employed to examine portfolio performance as a function of the number of funds in the portfolio. The present paper finds that as the number of funds in an FoF portfolio increases, performance improves in a mean–variance setting; however, measures of skewness and kurtosis behave less favourably given an investor's preferences for the higher moments of the return distribution. The majority of diversification benefits are realized when a portfolio of approximately 6 active equity funds are included in the FoF portfolio.     

Active investment manager portfolios and preferences for stock characteristics

The present study investigates the stock characteristic preferences of institutional Australian equity managers. In aggregate we find that active managers exhibit preferences for stocks exhibiting high‐price variance, large market capitalization, low transaction costs, value‐oriented characteristics, greater levels of analyst coverage and lower variability in analyst earnings forecasts. We observe stronger preferences for higher volatility, value stocks and wider analyst coverage among smaller stocks. We also find that smaller investment managers prefer securities with higher market capitalization and analyst coverage (including low variation in the forecasts of these analysts). We also document that industry effects play an important role in portfolio construction.     

On the asymptotically uniform distribution modulo 1 of extreme order statistics

Let (X_m)∞₁ be a sequence of independent and identically distributed random variables. We give sufficient conditions for the fractional part of rnax (X₁., X_n) to converge in distribution, as n ←∞ to a random variable with a uniform distribution on [0, 1).