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The Impact Of Prior Performance On The 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 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 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 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.
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 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 Swing Pricing and Fragility in Open-end Mutual Funds by : Dunhong Jin
Download or read book Swing Pricing and Fragility in Open-end Mutual Funds written by Dunhong Jin and published by International Monetary Fund. This book was released on 2019-11-01 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: How to prevent runs on open-end mutual funds? In recent years, markets have observed an innovation that changed the way open-end funds are priced. Alternative pricing rules (known as swing pricing) adjust funds’ net asset values to pass on funds’ trading costs to transacting shareholders. Using unique data on investor transactions in U.K. corporate bond funds, we show that swing pricing eliminates the first-mover advantage arising from the traditional pricing rule and significantly reduces redemptions during stress periods. The positive impact of alternative pricing rules on fund flows reverses in calm periods when costs associated with higher tracking error dominate the pricing effect.
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 The Spillover Effect of Managerial Taxes on Mutual Fund Risk-taking by : Anna Theresa Bührle
Download or read book The Spillover Effect of Managerial Taxes on Mutual Fund Risk-taking written by Anna Theresa Bührle and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: When faced with higher managerial taxes, mutual fund managers who personally invest in the funds they manage take on greater risk. By exploiting the enactment of the American Taxpayer Relief Act 2012 as an exogenous tax shock, we observe that co-investing fund managers increase risk-taking by 8%. Specifically, these managers adjust their portfolios by investing in stocks with higher beta. The observed effect appears to be driven by agency incentives, particularly for funds with a more convex flow-performance relationship and for managers who have underperformed compared to their peers in the past two years. Such tax-induced behavior is associated with negative fund performance. We highlight the role of co-investment in transmitting managerial tax shocks to mutual funds.
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.
Book Synopsis Flow-Performance Relationship and Tournament Behavior in the Mutual Fund Industry by :
Download or read book Flow-Performance Relationship and Tournament Behavior in the Mutual Fund Industry written by and published by . This book was released on 2001 with total page 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.
Book Synopsis Encyclopedia of Finance by : Cheng-Few Lee
Download or read book Encyclopedia of Finance written by Cheng-Few Lee and published by Springer Nature. This book was released on 2022-09-12 with total page 2746 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Encyclopedia of Finance comprehensively covers the broad spectrum of terms and topics relating finance from asset pricing models to option pricing models to risk management and beyond. This third edition is comprised of over 1,300 individual definitions, chapters, appendices and is the most comprehensive and up-to-date resource in the field, integrating the most current terminology, research, theory, and practical applications. It includes 200 new terms and essays; 25 new chapters and four new appendices. Showcasing contributions from an international array of experts, the revised edition of this major reference work is unparalleled in the breadth and depth of its coverage.
Download or read book Mutual Funds written by Seth Anderson and published by Springer Science & Business Media. This book was released on 2006-03-30 with total page 169 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
Book Synopsis Three Essays on Mutual Funds by : Xuemei Guo
Download or read book Three Essays on Mutual Funds written by Xuemei Guo and published by . This book was released on 2017 with total page 312 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation investigates the determinants of mutual fund flows and mutual fund performance. The first chapter examines the response of fund investors to style volatility and the impact of style volatility on the flow-performance relationship. Three main empirical findings are obtained using both a portfolio approach and a multivariate regression approach. First, I find that there is a significant positive relationship between the style volatility and the subsequent fund flows to mutual funds. This finding can be interpreted as either fund managers having style timing ability or fund managers catering to investors preferences or tastes. Second, the positive relationship between past style volatility and fund flows is less pronounced for funds with superior past performance. Lastly, fund style volatility has a dampening effect on the flow-performance relationship: the flow-performance sensitivity weakens by 12% when the past style volatility increases by one standard deviation. It is likely that performance is perceived as a less informative signal of investment ability for fund managers who follow inconsistent styles over time. The second chapter studies how the response of fund investors to past risk varies over business cycles. I employ the NBER boom indicator, the Consumer Sentiment Index, and the National Activity Index to proxy for economic conditions. I find that mutual fund investors react differently to risk across economic environments. Funds with more volatile past returns discourage fund investors. The investors’ demand for actively managed funds is higher under good market conditions. Fund flows are less responsive to risk during expansionary economic periods. This finding may indicate that fund investors are risk averse and become less risk averse in good market states. The third chapter empirically examines whether mutual fund performance is affected by prior family performance. I propose two testable hypotheses: the information and resource sharing hypothesis and the cross-fund subsidization hypothesis. The empirical findings suggest that there is a significant positive relationship between prior family performance and subsequent fund performance. This finding is consistent with the hypothesis that mutual funds in the same family share informational resources. This positive relation also justifies the finding in the mutual fund flow literature that fund flows are higher for funds with higher past family performance. Furthermore, I find that the predictive power of the prior family performance is stronger in larger fund families.
Book Synopsis Experiences of Mutual Fund Managers by : Jonas Klinkert
Download or read book Experiences of Mutual Fund Managers written by Jonas Klinkert and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis examines the impact of different experiences of mutual fund managers on fund risk and return characteristics. After controlling for time, fund and manager fixed effects, two major manager experience effects are identified. First, a higher manager career length, or alternatively a higher number of experienced recessions, leads to decreasing fund returns, skill and performance, joined by increased risk. Career concerns of mutual fund managers and incentive-based theories can provide an explanation hereon. Secondly, managers are sustainably affected from starting their career during a recession or bear market period. Funds managed by such recession managers exhibit significantly lower risk in form of volatility, value at risk and market as well as downside beta measures. This is in line with the previously identified impact of macroeconomic experiences on risk-taking by individuals and CEOs. Again, incentive-based theories and career concerns can provide a possible explanation.
