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Prior Performance And Risk Taking Of Mutual Fund Managers
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Book Synopsis The Impact of Prior Performance on the Risk-Taking of Mutual Fund Managers by : Manuel Ammann
Download or read book The Impact of Prior Performance on the Risk-Taking of Mutual Fund Managers written by Manuel Ammann and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the impact of prior performance on the risk-taking behavior of mutual fund managers. We contribute to the existing literature by using different measures of risks, a larger data set, and an econometric approach capturing non-linear effects and assigning exact probabilities to the mutual fund managers' adjustment of behavior. We find that prior performance in the first half of the year has, in general, a positive impact on the choice of the risk level in the second half of the year. Successful fund managers increase the volatility, the beta, and assign a higher proportion of their portfolio to value stocks, small firms, and momentum stocks in comparison to unsuccessful fund managers. Unsuccessful fund manager increase, on average, only the tracking error.
Book Synopsis Prior Performance and Risk-Taking of Mutual Fund Managers by : Manuel Ammann
Download or read book Prior Performance and Risk-Taking of Mutual Fund Managers written by Manuel Ammann and published by . This book was released on 2013 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the behavior of mutual fund managers with a special focus on the impact of prior performance. In contrast to previous studies, we do not solely focus on the volatility as a measure of risk, but also consider alternative definitions of risk and style. Using a Dynamic Bayesian Network, we are able to capture non-linear effects and to assign exact probabilities to the mutual fund managers' adjustment of behavior. In contrast to theoretical predictions and some existing studies, we find that prior performance has a positive impact on the choice of the risk level, i.e., successful fund managers take more risk in the following calendar year. In particular, they increase the volatility, the beta and the tracking error and assign a higher proportion of their portfolio to value stocks, small firms and momentum stocks. Overall, poor performing fund managers switch to passive strategies.
Book Synopsis Empirical Evidences on Risk-Taking and Performance of Mutual Fund by :
Download or read book Empirical Evidences on Risk-Taking and Performance of Mutual Fund written by and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relationship between performance and risk exposure for mutual funds. The preliminary analysis fails to support the tournament hypothesis, which predicts that poorly performing managers will increase risk exposure while outperforming managers will decrease risk exposure. Instead, we find evidence of risk reduction for extreme losers and risk increase for winning managers. Besides, the risk-taking fails to align manager interest with shareholder interest since the returns from the risk enhancement by winners and the risk reduction by losers is relatively worse than those with contradictory strategies. Overall, the competition among fund managers appears to affect management risk choice, and in turn has an effect on future performance. However, the effect of shifting risk on fund performance and the approach of altering portfolio risk vary with fund style and prior performance.
Book Synopsis Fund Flows, Performance, Managerial Career Concerns, and Risk-Taking by : Ping Hu
Download or read book Fund Flows, Performance, Managerial Career Concerns, and Risk-Taking written by Ping Hu and published by . This book was released on 2010 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a unified model of the interactions among investors, fund companies (represented by fund advisors) and fund managers. We show that the interplay between a manager's incentives from her compensation structure and career concerns leads to a non-monotonic (approximately U-shaped) relation between her risk choices and prior performance relative to her peers. Significantly out-performing (under-performing) managers are less (more) likely to be fired in the future, and are also more likely to increase relative risk. Ceteris paribus, relative risk declines with the level of employment risk faced by a manager. Using a large sample of mutual fund managers, we offer support for the hypothesized U-shaped relation between relative risk and prior performance, and provide evidence in support for the importance of employment risk in driving risk-shifting by fund managers. We also find that younger managers who face greater employment risk choose lower relative risk. We present evidence consistent with other hypotheses implied by our theory that link determinants of the fund flow-performance relation and managers' employment risk to their risk-taking behavior. Funds with higher expense ratios have less convex fund flow-performance relations and less convex U-shaped relations between relative risk and prior performance. Funds with younger managers, who face greater employment risk, have more convex U-shaped relative risk-prior performance relations.
Book Synopsis Mutual Fund Performance and Performance Persistence by : Peter Lückoff
Download or read book Mutual Fund Performance and Performance Persistence written by Peter Lückoff and published by Springer Science & Business Media. This book was released on 2011-01-13 with total page 604 pages. Available in PDF, EPUB and Kindle. Book excerpt: Peter Lückoff investigates why fund flows and manager changes act as equilibrium mechanisms and drive the performance of both previously outperforming and previously underperforming funds back to average levels.
Book Synopsis Investment Criteria for Mutual Fund Selection by : Jan Harkopf
Download or read book Investment Criteria for Mutual Fund Selection written by Jan Harkopf and published by Anchor Academic Publishing. This book was released on 2016-10 with total page 93 pages. Available in PDF, EPUB and Kindle. Book excerpt: The importance of mutual funds for individual investors has increased in recent decades. This becomes apparent when looking at the increased share of households owning mutual funds. These mutual fund investors usually want to receive a return which is above or at least close to the mutual fund’s benchmark. Consequently, investors want to invest in those funds which will show these patterns in the future. Some of these mutual funds receive much attention, since they generate extraordinary high performance. But the question that remains is whether it is possible to predict such performance before funds exhibit such outstanding performance. In the past, mutual fund investors focused extensively on performance or performance linked patterns, like the Morningstar star rating, and thus chased past performance. This seems surprising since performance persists only over a short time and is more persistent to weak mutual funds (1 and 2 star rated) than well performing mutual funds. Thus, chasing past performances seems to be a rather inferior strategy. Therefore, investors should try to identify alternative tools showing a high correlation to future mutual fund performance. In this book, mutual funds are analysed, especially open-end mutual funds and actively managed mutual funds. The main focus is on what purpose and usefulness active investments have and whether performance is persistent and what the determinants of mutual fund flows are. Moreover, some alternative measures will be introduced by explaining which attributes or methods should be used and avoided when selecting mutual funds.
Download or read book Suábios no Paraná written by and published by . This book was released on 1971 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Portfolio Performance Evaluation by : George O. Aragon
Download or read book Portfolio Performance Evaluation written by George O. Aragon and published by Now Publishers Inc. This book was released on 2008 with total page 123 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a review of the methods for measuring portfolio performance and the evidence on the performance of professionally managed investment portfolios. Traditional performance measures, strongly influenced by the Capital Asset Pricing Model of Sharpe (1964), were developed prior to 1990. We discuss some of the properties and important problems associated with these measures. We then review the more recent Conditional Performance Evaluation techniques, designed to allow for expected returns and risks that may vary over time, and thus addressing one major shortcoming of the traditional measures. We also discuss weight-based performance measures and the stochastic discount factor approach. We review the evidence that these newer measures have produced on selectivity and market timing ability for professional managed investment funds. The evidence includes equity style mutual funds, pension funds, asset allocation style funds, fixed income funds and hedge funds.
Download or read book Mutual Funds written by Seth Anderson and published by Springer Science & Business Media. This book was released on 2005-04-20 with total page 184 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mutual funds are the dominant form of investment companies in the United States today, with approximately $7 trillion in assets under management. Over the past half century an important body of academic research has addressed various issues about the nature of these companies. These works focus on a wide range of topics, including fund performance, investment style, and expense issues, among others. MUTUAL FUNDS: Fifty Years of Research Findings is designed for the academic researcher interested in the various issues surrounding mutual funds and for the practitioner interested in funds for investment purposes. The authors briefly trace the historical evolution of funds, present important aspects of the Investment Company Act of 1940, and then summarize a substantial portion of the academic literature which has been written over the past five decades. "This book presents an outstanding wealth of information on mutual funds in a remarkably readable format. It is probably the most comprehensive work currently available on funds. The book sheds light on the numerous issues surrounding mutual fund performance and pricing and is an important resource for any serious investor." Kathleen A. Wayner, Bowling Portfolio Management, President and CEO 513.871.7776
Book Synopsis The Management of Mutual Funds by : G.V. Satya Sekhar
Download or read book The Management of Mutual Funds written by G.V. Satya Sekhar and published by Springer. This book was released on 2016-11-12 with total page 182 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides insight into the multi-dimensional process of coordinating and supervising mutual funds. This book focuses on the management of mutual funds within financial markets, with an emphasis on how corporate governance and benchmarking influence asset and portfolio management. Chapters explore four important aspects of this process in particular detail: corporate governance, benchmarking, asset management and portfolio management. The author shows that the mutual fund industry provides wider access to payment systems and to a savings safety-net that operates similarly to deposit insurance. Furthermore, he demonstrates that the Indian government’s focus is on establishing the right of every person to have access to affordable basic financial services offered by banks and non-banks.
Book Synopsis A Review of Behavioural and Management Effects in Mutual Fund Performance by : Keith Cuthbertson
Download or read book A Review of Behavioural and Management Effects in Mutual Fund Performance written by Keith Cuthbertson and published by . This book was released on 2016 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper surveys and critically evaluates the literature on the role of management effects and fund characteristics in mutual fund performance. First, a brief overview of performance measures is provided. Second, empirical findings on the predictive power of fund characteristics in explaining future returns are discussed. Third, the paper reviews the literature on fund manager behavioural biases and the impact these have on risk taking and returns. Finally, the impact of organizational structure, governance and strategy on both fund risk taking and future performance is examined. While a number of surveys on mutual fund performance are available, these have not focused on the role of manager behavioural biases, manager characteristics and fund management strategic behavior on fund performance and risk taking. This review is an attempt to fill this gap. Empirical results indicate that finding successful funds ex-ante is extremely difficult, if not impossible. In contrast, there is strong evidence that poor performance persists for many of the prior “loser fractile” portfolios of funds. A number of manager behavioural biases are prevalent in the mutual fund industry and they generally detract from returns.
Book Synopsis Management structure for the mutual fund industry. Performance indicators and investment behavior of a team's decision-making process by : Yunus Cagdas
Download or read book Management structure for the mutual fund industry. Performance indicators and investment behavior of a team's decision-making process written by Yunus Cagdas and published by GRIN Verlag. This book was released on 2022-01-31 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: Academic Paper from the year 2021 in the subject Business economics - Investment and Finance, grade: 2,0, University of Hohenheim (Institut für Financial Management), language: English, abstract: The aim of this study is to identify differences in investment behavior - and in particular the special case of a team's decision-making process - as well as possible performance indicators. The research results to be presented should be used as guidance in selecting an appropriate management structure for the mutual fund industry. Before addressing the differing investment behaviors of the two management structures, the special dynamics that can operate within a team in decision making have to be examined. For this said purpose, the relevant literature provides some conflicting theories on decision making. When looking at the proportion of team-managed and single-managed mutual funds, it is observed that team funds have increased at the cost of single-managed funds. Thus, from 1992 to 2015, within all mutual funds, team-managed funds increased from 12% to 57%, while single-managed funds decreased from 88% to 43%. A similar development can be seen in the change of the management structure of a fund in Figure 1: A total of 553 mutual funds, which were previously managed individually, switched to a team fund, whereas only 317 funds changed from a team-managed fund to an single-managed fund. A crossover in the proportion of teams after the global financial crisis in 2008, in times when risk reduction by diversification began to gain in importance, is clearly observable. Thus, it should be in the interest of mutual funds to possess sufficient management diversity to reach an adequate niveau of diversification. As argued by Tom Stevenson, the investment director of Fidelity International, besides gender diversity, diversity in cognition, education and mindset represent a great strength. Research on the mutual fund industry indicates some differences in the investment behavior between team-managed and single-managed mutual funds. Especially concerning teams, different theories of decision making can be found, resulting in different investment styles and performance levels.
Book Synopsis Portfolio Manager Ownership and Mutual Fund Risk Taking by : Linlin Ma
Download or read book Portfolio Manager Ownership and Mutual Fund Risk Taking written by Linlin Ma and published by . This book was released on 2018 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the effect of portfolio manager ownership (i.e., skin in the game) on mutual fund risk taking. Using holdings-based risk change measures that capture managers' ex ante risk choices, we find that portfolio manager ownership reduces both intra-year and across-year risk-taking activities. The relation between ownership and risk reduction is particularly strong among managers with high agency-issue-induced risk-taking incentives, e.g., managers who face a more convex flow-performance relation, have poor past performance, or are not compensated based on long-term fund performance. Funds with greater managerial ownership are also associated with lower levels of total risk and downside risk. Overall, portfolio manager ownership serves as an incentive alignment mechanism and has important implications for mutual fund investors.
Book Synopsis Three Essays on the Performance Evaluation of Actively Managed Investment Funds by : Qing Yan
Download or read book Three Essays on the Performance Evaluation of Actively Managed Investment Funds written by Qing Yan and published by . This book was released on 2021 with total page 240 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation investigates the performance of hedge funds and actively managed U.S. equity mutual funds. The first chapter examines the relation between hedge funds and the low beta anomaly. Different conditions in the mutual fund and hedge fund industries should lead to different approaches with respect to the low beta anomaly. I find that, unlike most mutual funds, the average hedge fund tends to benefit considerably from the anomaly. About 2.3% per year of apparent alpha for the average hedge fund can be attributed to the low beta anomaly rather than manager skill. Low skill managers are the most reliant on the anomaly to generate returns, with the most reliant underperforming the least reliant by 5.9% per year. The second chapter uses machine learning to dynamically identify and optimally combine the predictors of hedge fund performance. The portfolio formed based on the machine learning models has an out-of-sample alpha of 7.8% per year. The importance of each predictor varies over time, but among the 22 predictors I consider, the consistently important predictors are average return, maximum return, alpha, systematic risk, and beta activity. Machine learning provides valuable, unique information about future hedge fund performance that is not captured by individual predictors. The third chapter studies whether the quality of fund risk management can predict fund performance. I find that the risk management skills of mutual fund managers-as quantified by their funds' maximum drawdowns-are persistent and predictive of subsequent risk-adjusted performance. Funds with relatively strong past performance and relatively low past maximum drawdowns have, on average, an out-of-sample alpha of 2.68% per year. That alpha is magnified when markets are turbulent-a time during which risk management skills should be most valuable. Investors are averse to drawdown risk. After controlling for typical measures of past performance, fund flows are still a decreasing function of maximum drawdowns, particularly among investors with greater risk aversion and during times of generally heightened risk aversion.
Book Synopsis Career Concerns of Mutual Fund Managers by : Judith A. Chevalier
Download or read book Career Concerns of Mutual Fund Managers written by Judith A. Chevalier and published by . This book was released on 1998 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the labor market for mutual fund managers and managers' responses to the implicit incentives created by their career concerns. We find that managerial turnover is sensitie to a fund's recent performance. Consistent with the hypothesis that fund companies are learning about managers' abilities, managerial turnover is more performance-sensitive for younger fund managers. Interpreting the separation-performance relationship as an incentive scheme, several of our results suggest that a desire to avoid separation may induce managers at different stages of their careers to behave differently. Younger fund managers appear to be given less discretion in the management of their funds; i.e. they are more likely to lose their jobs if their fund's beta or unsystematic risk level deviates from the mean for their fund's objective group. We also show that the shape of the job separation-performance relationship may provide an incentive for young mutual fund managers to be risk averse in selecting their fund's portfolio. Consistent with these implicit labor market incentives, younger fund managers do take on lower unsystematic risk and deviate less from typical behavior than their older counterparts. Finally, additional results on the flow of investments into mutual funds suggest that rather than just being due to a screening process, firing decisions may also be influenced by a desire to stimulate inflows of investment into the fund.
Book Synopsis Flow-performance Relationship and Tournament Behavior in the Mutual Fund Industry by : Baoling Ma
Download or read book Flow-performance Relationship and Tournament Behavior in the Mutual Fund Industry written by Baoling Ma and published by . This book was released on 2008 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt: "In this paper, we interpret the flow-performance relationship as an incentive scheme implicitly given to mutual fund managers by mutual fund investors. We show that the flow-performance relationship varies not only with economic activity but also across fund attributes. We provide evidence that the degree of convexity of the flow-performance relationship has a positive effect on the magnitude of tournament behavior. Different from the conventional tournament hypothesis, we show that although the convexity of the flow-performance relationship does produce implicit incentives for fund managers to modify risk-taking behavior as a function of their prior performance, whether or not the mid-year losers increase the risk of their portfolios highly depends on the convexity degree of the flow-performance relationship."--Author's abstract.
Download or read book Mutual Funds written by John Haslem and published by Wiley-Blackwell. This book was released on 2009-02-09 with total page 592 pages. Available in PDF, EPUB and Kindle. Book excerpt: This authoritative book enables readers to evaluate the various performance and risk attributes of mutual funds, while also serving as a comprehensive resource for students, academics, and general investors alike. Avoiding the less useful descriptive approach to fund selection, this book employs a balanced approach including both technique and application. The chapters combine clear summaries of existing research with practical guidelines for mutual fund analysis. Enables readers to analyze mutual funds by evaluating a fund's various performance and risk attributes. Includes templates, which provide an efficient, sound approach to fund analysis, interpretation of results, buy/sell decisions, and the timing of decisions. Combines clear summaries of existing research with practical guidelines for mutual fund analysis.
