Risk Shifting and Mutual Fund Performance
Reads0
Chats0
TLDR
In this article, the authors investigated the performance consequences of risk shifting, as well as the economic motivations and the mechanisms for risk shifting using a holdings-based measure of risk shifts, and found that funds that increase risk perform worse than funds that keep stable risk levels over time.Abstract:
Mutual funds change their risk levels significantly over time This paper investigates the performance consequences of risk shifting, as well as the economic motivations and the mechanisms of risk shifting Using a holdings-based measure of risk shifting, we find that funds that increase risk perform worse than funds that keep stable risk levels over time In addition, funds that expect higher benefits from risk shifting are more likely to increase risk and perform particularly poorly after increasing risk Our results are consistent with the notion that agency problems, rather than the ability to take advantage of changing investment opportunities, are the likely motivation behind risk shifting behaviorread more
Citations
More filters
Journal ArticleDOI
Assessment of mutual fund performance based on Ensemble Empirical Mode Decomposition
TL;DR: In this paper, the mutual fund return time series is decomposed by ensemble empirical model decomposition method, which is a data analysis method, especially for processing nonstationary and nonlinear time series, into three time-scales, namely, short cycle, long cycle and trend, which have different meaning on mutual fund management.
Journal ArticleDOI
Investor learning and mutual fund flows
TL;DR: In this article, the authors investigate the implications of investor learning for the sensitivity of mutual fund flows to past performance and show that when some sophisticated investors learn from past fund performance to form their posterior expectations of managerial ability, the flow-performance sensitivity should be weaker for funds with more volatile past performance.
Journal ArticleDOI
How Does the Speed of Capital Flows Affect Factor Momentum, Reversal and Volatility?
Xi Dong,Namho Kang,Joel Peress +2 more
TL;DR: This article showed that hedge-fund and mutual-fund flows drive much of anomaly-return dynamics by correcting and amplifying anomalies, and doing so slowly, and that their contributions to the autocorrelation and volatility of anomaly returns add up to 57% over horizons longer than one year, vs. a few percent over shorter horizons.
Journal ArticleDOI
Dynamic resource allocation with hidden volatility
TL;DR: In this article, the authors study a firm's internal resource allocation using a dynamic principal-agent model with endogenous cash flow volatility, where the principal supplies the agent with resources for productive use, but the agent has private control over both project volatility and resource intensity.
Mutual fund ownership, firm specific information, and firm performance: evidence from China
TL;DR: Li et al. as mentioned in this paper showed empirically that the positive association between mutual fund ownership and firm value in China is mainly driven by the informed trading of mutual funds, and they provided an informational link between a decomposed component of market-to-book ratio (firm specific valuation component) and mutual fund holdings.
References
More filters
Journal ArticleDOI
Common risk factors in the returns on stocks and bonds
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this article, the authors identify five common risk factors in the returns on stocks and bonds, including three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity.
Journal ArticleDOI
Risk, Return, and Equilibrium: Empirical Tests
Eugene F. Fama,James D. MacBeth +1 more
TL;DR: In this article, the relationship between average return and risk for New York Stock Exchange common stocks was tested using a two-parameter portfolio model and models of market equilibrium derived from the two parameter portfolio model.
Journal ArticleDOI
On Persistence in Mutual Fund Performance
TL;DR: Using a sample free of survivor bias, this paper showed that common factors in stock returns and investment expenses almost completely explain persistence in equity mutual fund's mean and risk-adjusted returns.
Journal ArticleDOI
The performance of mutual funds in the period 1945–1964
TL;DR: Jensen's Alpha as discussed by the authors is a risk-adjusted measure of portfolio performance that estimates how much a manager's forecasting ability contributes to the fund's returns, based on the theory of the pricing of capital assets by Sharpe (1964), Lintner (1965a) and Treynor (Undated).
Journal ArticleDOI
Liquidity Risk and Expected Stock Returns
Lubos Pastor,Robert F. Stambaugh +1 more
TL;DR: In this article, the authors investigated whether marketwide liquidity is a state variable important for asset pricing and found that expected stock returns are related cross-sectionally to the sensitivities of returns to fluctuations in aggregate liquidity.