What is the Abnormal Return Performance of Mutual Funds due to Private Earnings Information?

Abstract

This study, employs a unique database of monthly portfolio holdings of Australian mutual funds to measure the monthly abnormal returns realised by mutual funds due to earnings information across all months in a typical year. We find evidence consistent with mutual funds realising abnormal returns due to earnings news in both the pre-announcement period and over the announcement window. The results suggest that earnings information explains approximately 25% of a mutual funds average monthly abnormal performance. Finally, we find that the contribution of earnings to the performance of mutual funds is greatest in the month in which earnings are announced.