Download or read book Does Style Shifting Activity Predict Performance Evidence from Equity Mutual Funds written by Ulf Herrmann and published by . This book was released on 2018 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study introduces an innovative approach to measuring the “style-shifting activity” (SSA) of mutual funds using daily returns. Applying our new measure to a comprehensive sample of 2631 active US equity mutual funds, we show (i) that SSA predicts future performance, especially for current outperformers, and (ii) that SSA adds new information previously not captured by alternative return-based activity measures such as tracking error or R-squared. Comparing the three measures, we show that SSA captures activity very selectively, which makes it a stable and reliable predictor of future performance. Tracking error and R-squared, however, seem to additionally capture some unobserved fund characteristics, as the direction and power of their predictions depend heavily on the consideration of time- and fund-fixed effects. Moreover, investment strategies based on past SSA and past performance earn up to 2.4% (3.6%) p.a. risk-adjusted net (gross) returns which is economically and statistically significant.
Download or read book Are Style Rotating Funds Successful at Style Timing Evidence from the US Equity Mutual Fund Market written by Adam James Corbett and published by . This book was released on 2016 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Are managers who style-rotate successful at timing style shifts? Or, does this type of activity erode fund value? It is well documented that fund styles exposures vary over time, whether it be a result of passive style drift or strategic changes by managers to capitalise on broad style movements. It is therefore reasonable to expect that funds with high style rotation ought to be capable of timing broad style movements. This paper investigates whether funds that frequently change investment styles are capable of timing style movement, and how this behaviour influences performance. Time-varying fund style exposures are estimated for a sample of US domestic equity mutual funds from a dynamic state-space factor model as well as from a holdings-based approach. Style-timing ability is measured from four-factor Treynor-Mazuy and Henriksson-Merton models. The results show that funds that more aggressively rotate portfolios across market, size, value and momentum exposures are less capable of timing movements in these respective style categories and as such perform worse than those that maintain consistent style exposures.
Download or read book Investment Style and Performance written by Bernhard Breloer and published by . This book was released on 2014 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we study the performance and performance persistence of international equity mutual funds with a focus on fund investment styles. Using a best-fit index methodology, we sort funds yearly based on the style dimensions of size and value/growth, as well as on regional categories (Europe, Pacific and emerging markets). In doing so, we find that (i) the performance of international funds clearly differs regarding style and regional categories, (ii) based on a five-factor alpha, most international style portfolios exhibit performance persistence, and (iii) top performing SMID-cap portfolios and top performing emerging market portfolios show significant and positive alphas. Moreover, using a conditional five-factor alpha as alternative ranking criteria further improves the prediction of future international fund performance.
Download or read book Does Mutual Fund Investment Style Consistency Affect the Performance of Mutual Funds written by Yi Zhao and published by . This book was released on 2009 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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.
Download or read book The Presence of Style Drift in Active Mutual Funds written by Angeline Kim Pei Chua and published by . This book was released on 2018 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: Fund managers' style drift behaviour alters fund risks and may have an impact on fund performance that is detrimental to fund investor's interest. This paper is a first study on the existence and effects of style drift in the fast growing fund management industry in China. It provides a fine-grained analysis of China's open-end equity funds based on our fund classifications that accurately reflect the true style of each fund whose name, objective, strategy, philosophy and prospectus are all manually analysed for drift detection. Employing a holding-based methodology and using a unique Chinese dataset, we find evidence of style drift in China. The behaviour is found regardless of fund age. We also examine whether style drift is influenced by fund characteristics and investment timeframe. Our findings offer a new approach in addressing the issue of style drift with evidence providing new insights on fund performance evaluation and design of fund managers' compensation.
Download or read book The Analysis of Mutual Fund Performance written by Diana P. Budiono and published by . This book was released on 2009 with total page 139 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Style Investing written by Lukasz Pomorski and published by . This book was released on 2004 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: I investigate the impact of returns on broad styles, such as growth funds, on mutual fund flows. I test whether mutual fund investors pursue styles, as predicted by the style investing hypothesis of Barberis and Shleifer (2003). Although in the aggregate, style-level flows to style categories are positively (negatively) related to past returns on the given category (other categories), at the individual fund level this pattern disappears. In fact, after controlling for fund returns, flows are negatively related to style performance. Such patterns persist for three different style classifications I consider here. The findings go against the hypothesis of style investing, and are consistent with within-style return chasing and evaluating fund managers based on both fund-level and style-level returns.
Download or read book The Efficient Market Theory and Evidence written by Andrew Ang and published by Now Publishers Inc. This book was released on 2011 with total page 99 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Efficient Market Hypothesis (EMH) asserts that, at all times, the price of a security reflects all available information about its fundamental value. The implication of the EMH for investors is that, to the extent that speculative trading is costly, speculation must be a loser's game. Hence, under the EMH, a passive strategy is bound eventually to beat a strategy that uses active management, where active management is characterized as trading that seeks to exploit mispriced assets relative to a risk-adjusted benchmark. The EMH has been refined over the past several decades to reflect the realism of the marketplace, including costly information, transactions costs, financing, agency costs, and other real-world frictions. The most recent expressions of the EMH thus allow a role for arbitrageurs in the market who may profit from their comparative advantages. These advantages may include specialized knowledge, lower trading costs, low management fees or agency costs, and a financing structure that allows the arbitrageur to undertake trades with long verification periods. The actions of these arbitrageurs cause liquid securities markets to be generally fairly efficient with respect to information, despite some notable anomalies.
Download or read book Mutual Fund Performance and Manager Style written by James L. Davis and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this analysis of the relationship between equity mutual fund performance and manager style, two questions are addressed. First, does any investment style generate abnormal returns on average? Second, when funds are grouped by equity style, does any style exhibit performance persistence? The answers from this study are as follows: None of the styles earned positive abnormal returns during the 1965-98 sample period, and value funds realized negative abnormal returns of about 2.75 percentage points a year. Some evidence was found of short-run performance persistence among the best-performing growth funds and among the worst-performing small-cap funds.
Download or read book Does Trading by ETF and Mutual Fund Investors Hurt Performance Evidence from Time and Dollar Weighted Returns written by Ananth Madhavan and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the “return gap” between dollar-weighted returns that account for intermediate investor flows (internal rate of return) and buy-and-hold returns that funds typically report. Our sample constitutes all US-domiciled open-end mutual funds and exchange-traded funds (ETFs), and covers both fixed income and equity funds, as well as active and index styles of management. We find that return chasing behavior explains the cross-sectional pattern of the return gap. The high turnover of liquid ETFs does not lead to sub-par returns for investors in these funds.
Download or read book Style Rotation and Performance Persistence of Mutual Funds written by Iwan Meier and published by . This book was released on 2008 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Do Investors Chase Performance Or Skill Evidence from Mutual Fund Flows written by Jon A. Fulkerson and published by . This book was released on 2017 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: When evaluating a manager, investors should attempt to separate luck from skill. We find a mutual fund manager's demonstrated skill better predicts future performance than past fund performance. Despite that fact, investors tend to buy the funds with the best past performance, not the funds whose managers have demonstrated the most skill. Further, investors react strongly to fund performance even when it contains no information about manager skill. By failing to separate luck from skill, investors make inferior capital allocations.
Download or read book Return Based Style Analysis with Time Varying Exposures written by Laurens Swinkels and published by . This book was released on 2013 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper focuses on the estimation of mutual fund styles by return-based style analysis. Often the investment style is assumed to be constant through time. Alternatively, time variation is sometimes implicitly accounted for by using rolling regressions when estimating the style exposures. The former assumption is often contradicted empirically, and the latter is inefficient due to its ad hoc chosen window size. We propose to use the Kalman filter to model time-varying exposures of mutual funds explicitly. This leads to a testable model and more efficient use of the data, which reduces the influence of spurious correlation between mutual fund returns and style indices. Several stylized examples indicate that more reliable style estimates can be obtained by modeling the style exposure as a random walk, and estimating the coefficients with the Kalman filter. The differences with traditional techniques are substantial in our stylized examples. The results from our empirical analyses indicate that the structural model estimated by the Kalman filter improves style predictions and influences results on performance measurement.
Download or read book Predicting Mutual Fund Performance written by Louis T. W. Cheng and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In order to outperform his peers, a mutual fund manager may decide to invest in stocks that are considerably different from his competitors. By investing in a unique portfolio, the fund manager has a greater chance of either outperforming or underperforming his peers than those managers who invest in a common portfolio (i.e., herding). This study finds some evidence that mutual funds with unique portfolios tend to earn higher returns on an absolute and a risk-adjusted basis, compared to funds that invest in more common portfolios. The results demonstrate some empirical supports for our hypothesis for both six-month and one-year holding periods as well as for growth and growth/income funds. We conjecture these results are consistent with the argument that fund managers investing in uncommon portfolios possess superior stock selection ability. Consequently investing in these undervalued stocks significantly improves their fund returns.
Download or read book Investors Reactions to Manipulation of Performance Measures written by Bin Yu and published by . This book was released on 2011 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates how manipulation of fund performances affects fund flow in the US open-ended mutual fund industry. The flaws of conventional performance measures (CPMs) enable fund managers to artificially augment fund performance so as to attract more money. By comparing CPMs with manipulation proof performance measures (MPPM) introduced by Goezmann, Ingersoll, Spiegel, and Welch (2007), we verify that manipulation exists in the mutual fund industry. Using U.S. open-ended mutual fund data from 1991 to 2007, we classify the sample into manipulated and un-manipulated funds, and further demonstrate that individual investors, rather than institutional investors, are more prone to being deceived by manipulation behaviors and thus provide more money to manipulated funds. We start in Chapter 2 with the question of the best model for predicting fund flow. Using a US mutual fund sample as empirical evidence, we compare multiple models of predicting expected flow, and find that models considering a variety of regressors (e.g. past performance, fund size, age) outperform the models that only include lagged flow as the explanatory variable. We then generate the expected flow from the best predicting model, which together with total flow would be used when assessing the investors' reactions to manipulation. Chapter 3 examines whether fund performance measures are manipulated. We show that MPPM can help avoid manipulation, and there is a significant performance discrepancy between MPPM and CPMs when compared to the market. Hence we verify that there are performance manipulations in the mutual fund industry. In addition, we find that the manipulated funds are mainly funds with excess returns below the mean, and the manipulation on retail funds and new funds are more significant. Moreover, we find that after the new Morning Star Rating, which applies a similar intuition as MPPM, was popularized in 2002, the manipulations of performance significantly decreased. Given that CPMs can be manipulated, Chapter 4 investigates whether investors are deceived and provide more money to these funds. After controlling for endogeneity between fund flow and performance, we find that the manipulated funds attract significantly more money in comparison with a group of un-manipulated funds. Specifically, we show that in the retail sample, manipulations have a significantly positive effect on flows, whereas the effect is insignificant in the wholesale subsample. -- provided by Candidate.
Download or read book Style Consistency Fund Flow and Performance written by Russell B. Gregory-Allen and published by . This book was released on 2015 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This research investigates the relationship between mutual funds investment style consistency, the future funds performance, and funds net flow. Using a large sample of actively-managed U.S. equity mutual funds from Morningstar database, for the period from January 2002 to December 2011, 5555 mutual funds are classified into nine style categories. Our results support the findings from existing literatures that style consistency is of vital importance to fund performance. Taking a different approach we find that more style consistent funds tend to have better long term future performance. However, results suggest that style consistency is not related to future funds net flows, indicating that investors do not pay more attention to style consistency when making their future investment decisions.
