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Country Rotation and International Mutual Fund Performance

Published online by Cambridge University Press:  14 March 2025

Wei Jiao Open the ORCID record for Wei Jiao [Opens in a new window] ,
G. Andrew Karolyi  and
David Ng Open the ORCID record for David Ng [Opens in a new window]
Wei Jiao
Affiliation:
Rutgers University Rutgers School of Business–Camden wei.jiao@rutgers.edu
G. Andrew Karolyi
Affiliation:
Cornell University Cornell SC Johnson College of Business gak56@cornell.edu
David Ng*
Affiliation:
Cornell University Cornell SC Johnson College of Business
*
dtn4@cornell.edu (corresponding author)
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Abstract

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International equity funds attain superior subsequent performance by actively changing their country asset allocations, which we capture through a new measure of active country rotation intensity. Across funds, those that rotate country allocations with the greatest intensity on average have the highest value added. We offer evidence that a fund’s change of holdings in a country is associated with future outperformance in those specific holdings. Outperformance is concentrated on the downside when funds sell down country holdings before subsequent poor country market returns. Overall, our findings affirm that active international mutual funds have country market timing abilities.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , First View , pp. 1 - 33
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2025. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

We thank Stephan Siegel (the editor), Oleg Chuprinin (the referee), Yakov Amihud, Huaizhi Chen, Yong Chen, George Gao, Anne Hansen, Marcin Kacperczyk, Dong Lou, Yan Lu, Lawrence Jin, Justin Murfin, Ella Patelli, Hongxun Ruan, David Schumacher, Tao Shu, Margarita Tsoutsoura, Yangru Wu, Hongjun Yan, Scott Yonker, and seminar participants at Case Western Reserve, CICF, CFEA, CFRC, Cornell, CUHK-RAPS, FMA, MFA, NFA, Nanyang Technological University, Rutgers, UC-Irvine, and SFS Cavalcade AP for their many suggestions. Karolyi serves as a consultant to Avantis Investors.

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