Do Focused Funds Offer Superior Performance in an Emerging Market? Evidence from Taiwan's Stock Market

Abstract

We examine the effects of the number of stock holdings and industry concentration on Taiwan's equity fund performance. The quadratic regression model is applied to explore the optimal number of stock holdings for mutual funds. The empirical results suggest that funds with a smaller number of stock holdings and with a higher level of industry concentration achieve better performance. We also find that mutual fund performance and the number of stock holdings have an inverted U-shaped relationship, and funds that hold twenty-four to twenty-eight stocks can generate superior performance.

Keywords:

• emerging market
• focused funds
• industry concentration
• mutual fund performance
• optimal number of stock holdings