Literature review and Research Gaps: The role of private information on global factors for mutual funds holdings and performance

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This paper is written to investigate the performance and the portfolio holding choices of mutual funds that possess private global information in normal and in period of shocks. We will expose further the potential strategies and characteristics (long term versus short term) of the institutional fund managers that hold private global information. Finally, we will assess the impact of private information on global factors held by fund managers on the transmission of financial shocks. There is actually a lack in the literature concerning mutual funds holdings, performance and strategies when they have informational advantage on global factors. Thus, we will expose in this paper the literature findings on these topics and we will deduce potential research gaps. Consequently, we would like to contribute to the literature by investigating these topics that we believe are essential to explain international investments along with other puzzling phenomenon in the existing literature. We expect that when picking their investments, mutual funds choose to hold stocks with high sensitivity for global factors on which they are well informed and specialized and tend to have a long term investment horizon on their holdings. Hence, the use of private macroeconomic information by mutual funds managers may enable them to outperform others. We suggest also that the informational advantage on common factors might play a positive role in mitigating the transmission of financial shocks.

Author(s):

Barbara Abou Tanos    
Université Grenoble Alpes - Cerag Laboratory
France