Risk Shifting and Mutual Fund Performance
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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
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Time-Varying Fund Manager Skill
TL;DR: This paper proposed a new measure of managerial ability that weighs a fund's market timing more in recessions and stock picking more in booms than either market timing or stock picking alone and predicts fund performance.
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Marcin Kacperczyk,Marcin Kacperczyk,Stijn Van Nieuwerburgh,Stijn Van Nieuwerburgh,Stijn Van Nieuwerburgh,Laura Veldkamp,Laura Veldkamp,Laura Veldkamp +7 more
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References
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Journal ArticleDOI
How Active Is Your Fund Manager? A New Measure That Predicts Performance
Martijn Cremers,Antti Petajisto +1 more
TL;DR: Active Share as discussed by the authors is defined as the share of portfolio holdings that differ from the benchmark index holdings, i.e., the percentage of shares held by a portfolio holder that is different from the percentage held by the entire portfolio.
Journal ArticleDOI
Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization
TL;DR: The authors investigated the effect of scale on performance in the active money management industry and found that fund returns decline with lagged fund size, even after accounting for various performance benchmarks, suggesting that these adverse scale effects are related to liquidity.
Journal ArticleDOI
Performance-measurement without benchmarks - an examination of mutual fund returns
Mark Grinblatt,Sheridan Titman +1 more
TL;DR: In this paper, a new measure of portfolio performance is introduced and applied to study the performance of a large sample of mutual funds, and the measure used in this study employs portfolio holdings and does not require the use of a benchmark portfolio.
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