Stock preferences and derivative activities of Australian fund managers

Author: Pinnuck M.

Source: Accounting and Finance, Volume 44, Number 1, March 2004 , pp. 97-120(24)

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Abstract:

The present paper examines both the characteristics of stocks that fund managers prefer to hold and their use of derivatives. We find strong evidence that fund managers prefer large, liquid and low volatility stocks. Weak evidence exists that fund managers prefer to hold stocks that are past winners. In relation to derivatives, just over half of the sampled Australian fund managers hold derivatives in the form of exchange traded options. Of those that do trade in derivatives, it is found the level of exposure to stock price movements achieved by options is not significant relative to the total investment portfolio.

Keywords: Fund managers; Stock preferences; Derivatives

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-629x.2004.00102.x

Affiliations: 1: Department of Accounting, University of Melbourne, Australia

Publication date: 2004-03-01