The Relationship between Industry Concentration and Mutual Fund Performance

This paper examines how industry concentration is related to mutual fund performance using Data Envelopment Analysis and Spearman Rank Correlation with data from 2010 to 2015. The results indicate that there is a significant positive correlation between the six-year average of industry concentration index and fund performance. By contrast, if analyzed on an annual basis, the correlation turns out to be insignificant. The findings suggest that fund managers might attain better performance in the long term by concentrating holdings in industries where they have informational advantages.