"Outperformance: Does Managerial Specialization Pay?"
Abstract: In this study, we investigate whether managerial specialization leads to significant outperformance of investment trusts. In the existing literature on the performance of mutual funds one of the unsolved puzzles is the persistence of outperformance. We argue that specialization is one of the factors determining this persistence. We use data on Real Estate Investment Trusts since managerial specialization of these companies can be measured in a straightforward way. We look at the effects of specialization by property type and by geographic region and find that property specialization leads indeed to an outperformance of the market, whereas geographical specialization leads to underperformance.
This paper was presented at the Financial Institutions Center's conference on Performance of Financial Institutions, May 8-10, 1997.
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