Fabio Moneta (University of Ottawa)

“Holding Horizon: A New Measure of Active Investment Management”

Short bio: Fabio Moneta is an Associate Professor of Finance and a Royal Bank of Canada Fellow of Finance at the Telfer School of Management, University of Ottawa. Before joining Telfer, he was an Assistant Professor at the Smith School of Business, Queen’s University. He received his PhD in Finance from the Carroll School of Management, Boston College. He also holds an MSc in Finance from CORIPE Piemonte (Turin, Italy) and a BA in Economics from the University of Pisa in Italy. He has published articles in leading journals including the Journal of Financial and Quantitative Analysis and Management Science.

Abstract: This paper proposes a new holding horizon (HH) measure of active management and examines the relation between horizon and manager skill. Our HH measure identifies, in the cross-section, funds with higher future long-term alphas, while reported turnover identifies, in the time-series, when a particular fund is likely to exhibit a higher short-run alpha. The superior long-term performance of long-horizon funds is due to their selection of stocks with strong long-run fundamentals. Moreover, stocks largely held by long-horizon funds outperform stocks largely held by short-horizon funds by 2.7%-3.5% per year, adjusted for risk, over the following five-year period.