Date of Award

Spring 8-3-2021

Degree Type


Degree Name

Doctor of Business Administration (DBA)

First Advisor

Dr. Vikas Agarwal

Second Advisor

Dr. Zhen Shi

Third Advisor

Dr. Jeffrey Busse


This study examines the behavior of small-cap equity mutual fund managers during certain turning points in the economic cycle. Although each recession is unique, there is evidence supporting time variation in equity style performance in and around recession periods. In general, large-cap firms have greater access to capital thereby reducing financial stress during recessions compared to small-cap firms. As a result, some managers may use style rotation as a tool to improve their performance or reduce risk during these turning points in the economic cycle. I show that during the last two NBER cycle recessions, small-cap managers significantly increase holdings in large-cap stocks following the peak in economic activity. I find some evidence of a positive relation between skill and large-cap holdings: skilled small-cap managers are more likely to increase holdings in large-cap stocks in recession periods than unskilled ones. Finally, the evidence that managers reap the reward of style rotation is mixed. During the first recession period, the results indicate improved returns for managers that rotate into large-cap stocks with weaker evidence of improved flows. During the second recession period, flows improve but not returns. One possible explanation for this result is that large-cap stocks did not provide the same boost to performance during the second recession as they did during the first.


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