This paper uses machine learning techniques to identify the main factors behind portfolio reallocations decided by equity mutual fund managers that invest in emerging markets. These techniques, combined with the use of a large set of characteristics referring to individual securities, enable a granular analysis of these factors.
Firm size and market characteristics, such as capitalization and trading volume, are the factors that most affect portfolio reallocations. Their relative importance changes over time (e.g. during periods of financial turmoil), depending on the characteristics of mutual funds (such as an active or passive investment strategy), and in relation to the type of investors targeted by the fund (professional or retail).
