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Author: Kai Aschick Publisher: ISBN: Category : Languages : en Pages :
Book Description
This thesis contributes to existing literature by analysing the role of performance streaks in the US mutual fund industry. Existing research suggests that performance streaks, i.e. multiple consecutive months of positive or negative performance, are an important determinant of mutual fund flows. My dataset comprises monthly returns and net-flows from US equity mutual funds from 1996 through 2015. My first analysis shows that streaks are not an indication of performance persistence and should not be used in investment decisions. Next, I develop two forecasting models using streaks based on several different performance metrics, such as excess returns and CAPM-alphas. The first one is a probit model that forecasts future investor sentiment, measured by the sign of future net-flows. This model is very robust to different time period specifications. The second one is a multiple linear regression model that forecasts actual future net- flows. The performance of this model strongly depends on the time period specified, as it performs poorly following the financial crisis. In both models the best-performing specification uses streaks based on CAPM-alphas. However, a Shapley decomposition reveals that streaks are, despite being statistically significant, the least-important predictors of future net-flows. Instead, lagged net-flows are the most-important determinants of future net-flows. The results of this thesis suggest that active streaks tip the scales when investors decide between two or more funds with a comparable track record. Hence, the results presented are ambiguous regarding investor rationality.
Author: Kai Aschick Publisher: ISBN: Category : Languages : en Pages :
Book Description
This thesis contributes to existing literature by analysing the role of performance streaks in the US mutual fund industry. Existing research suggests that performance streaks, i.e. multiple consecutive months of positive or negative performance, are an important determinant of mutual fund flows. My dataset comprises monthly returns and net-flows from US equity mutual funds from 1996 through 2015. My first analysis shows that streaks are not an indication of performance persistence and should not be used in investment decisions. Next, I develop two forecasting models using streaks based on several different performance metrics, such as excess returns and CAPM-alphas. The first one is a probit model that forecasts future investor sentiment, measured by the sign of future net-flows. This model is very robust to different time period specifications. The second one is a multiple linear regression model that forecasts actual future net- flows. The performance of this model strongly depends on the time period specified, as it performs poorly following the financial crisis. In both models the best-performing specification uses streaks based on CAPM-alphas. However, a Shapley decomposition reveals that streaks are, despite being statistically significant, the least-important predictors of future net-flows. Instead, lagged net-flows are the most-important determinants of future net-flows. The results of this thesis suggest that active streaks tip the scales when investors decide between two or more funds with a comparable track record. Hence, the results presented are ambiguous regarding investor rationality.
Author: Louis Lowenstein Publisher: John Wiley & Sons ISBN: 0470280204 Category : Business & Economics Languages : en Pages : 242
Book Description
Based on cutting-edge research by leading corporate critic Louis Lowenstein, The Investor’s Dilemma: How Mutual Funds Are Betraying Your Trust and What to Do About It reveals how highly overpaid fund sponsors really operate and walks you through the conflicts of interest found throughout the industry. Page by page, you’ll discover the real problems within the world of mutual funds and learn how to overcome them through a value-oriented approach to this market.
Author: Peter Lückoff Publisher: Springer Science & Business Media ISBN: 3834965278 Category : Business & Economics Languages : en Pages : 604
Book Description
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.
Author: Galla Salganik-Shoshan Publisher: ISBN: Category : Languages : en Pages : 49
Book Description
This paper compares the fund selection criteria used by investors in retail mutual funds with the criteria of investors in institutional mutual funds. I find that, compared with investors of retail mutual funds, clients of institutional mutual funds use more quantitatively sophisticated criteria such as risk-adjusted return measures and tracking error, demonstrate stronger momentum-driven and herding behaviors, and are less sensitive to fund expense ratio. In addition, I provide evidence that the previously-documented convex form of the flow-performance relationship is driven mostly by retail funds.
Author: Steve A. Nenninger Publisher: ISBN: Category : Languages : en Pages : 88
Book Description
This dissertation examines mutual fund performance from the points of view of three distinct, but interrelated parties: individual investors, financial advisors, and the boards of directors of mutual fund companies. In the first essay, the flow-performance sensitivity of no-load funds and the three main classes of load fund shares are compared, assuming investment advisors are more likely to guide the decision-making process of load fund investors. In the second essay, the timing of the decision to replace fund managers is examined. In the third essay, performance of actively managed mutual funds are separately examined during good and bad states of the market to test whether mutual funds perform differently under different market conditions.
Author: Lily Xu Publisher: ISBN: Category : Languages : en Pages : 56
Book Description
We examine whether U.S. equity mutual funds exhibit a disposition bias, the tendency to sell winners and hold losers, and how this influences performance, investor flows and fund survival. About 30% of all funds exhibit some degree of disposition behavior. Funds with a disposition bias underperform funds that are not disposition prone by 4-6% per year. Moreover, even after controlling for performance, tax overhang and other factors that potentially affect flows, funds with a disposition bias attract significantly smaller flows than other funds. These results suggest that performance and tax efficiency are all important to mutual fund investors. Rational explanations for a disposition bias are not supported by the evidence. However, we find that mutual fund investors are smart enough to minimize investment in disposition-prone funds. As a result, these funds have significantly higher rates of failure than other funds, thereby potentially reducing the impact of irrational trading behavior on security prices.
Author: Thadavillil Jithendranathan Publisher: ISBN: Category : Languages : en Pages :
Book Description
This paper studies two investor behavioral theories - gambler's fallacy and hot-hand fallacy - using Czech open-end fund data. Weekly net fund flows indicate that investors tend to bring more money into the funds based on their past performance, which can be construed as an indication of hot-hand fallacy. With monthly data there is weak indication that investors in certain sectors tend to reduce the inflow into funds that had superior performance in the past months, which may indicate the gambler's fallacy. The study indicates two sides of the Czech investor's behavior. In the short run they are willing to chase the returns, but in the long run show their conservative streak by avoiding return chasing.
Author: Laszlo Pal Jakab Publisher: ISBN: 9780438088467 Category : Languages : en Pages : 84
Book Description
I study the effects of competition on the investment behavior and performance of active mutual funds. I find that funds respond to increased competitor scale by curtailing costly active management. To establish causality, I exploit quasi-exogenous variation in fund flows created by a natural experiment-the 2003 mutual fund scandal. Funds whose competitors were the most affected by the scandal expand active management and perform better after the scandal. Interpreting the findings through the lens of models of decreasing returns to scale indicates information asymmetry between fund managers and outside investors.
Author: Kai Aschick
Author: Kai Aschick
Author: Louis Lowenstein
Author: Peter Lückoff
Author: Gjergji Cici
Author: Galla Salganik-Shoshan
Author: Steve A. Nenninger
Author: Lily Xu
Author: Russ Wermers
Author: Thadavillil Jithendranathan
Author: Laszlo Pal Jakab