Abstract

This paper decomposes the performance of active mutual funds based on the investment horizon of their holdings and trades, using both daily holdings and transaction data. Funds earn 0.73% per year from recent trades (in the last half year), and profit substantially from long-term holdings (1.25% per year). These results generally hold across all investment styles, with sales contributing as much as purchases. Trades made by growth, small-cap, momentum, or small funds contribute more in half a year but contribute negatively to performance from half a year to one year, indicating funds profit from their specializations.