Download or read book Return Persistence and Fund Flows in the Worst Performing Mutual Funds written by Jonathan Berk and published by . This book was released on 2010 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: We document that the observed persistence amongst the worst performing actively managed mutual funds is attributable to funds that have performed poorly both in the current and prior year. We demonstrate that this persistence results from an unwillingness of investors in these funds to respond to bad performance by withdrawing their capital. In contrast, funds that only performed poorly in the current year have a significantly larger (out)flow of funds/return sensitivity and consequently show no evidence of persistence in their returns.

Download or read book Return Persistence and Fund Flows in the Worst Performing Mutual Funds written by Jonathan B. Berk and published by . This book was released on 2007 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: We document that the observed persistence amongst the worst performing actively managed mutual funds is attributable to funds that have performed poorly both in the current and prior year. We demonstrate that this persistence results from an unwillingness of investors in these funds to respond to bad performance by withdrawing their capital. In contrast, funds that only performed poorly in the current year have a significantly larger (out)flow of funds/return sensitivity and consequently show no evidence of persistence in their returns.

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.

Download or read book How Investors Interpret Past Fund Returns written by Anthony W. Lynch and published by . This book was released on 2011 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Several recent papers find a convex relation between past returns and fund flows of open-end mutual funds. We show this pattern to be consistent with fund incentives, in that funds will discard exactly those strategies which underperform. Past returns contain less information about the future performance of funds which change strategies, so fund flows are less sensitive to past returns when past returns are lower. Evidence from the performance persistence literature supports this view, though the behavior of investors in the very worst funds remains anomalous. We test two implications of our story using a new data set of daily mutual fund returns from Micropal and manager-change dates from the CRSP mutual fund data set. The first implication is that strategy changes occur only after bad fund performance. The other is that poor performers who change strategy enjoy a larger performance improvement than poor performers who do not. Using change in risk loadings from a four factor model and a manager-change variable as proxies for change in strategy, we find empirical support for both these implications.

Download or read book Return Persistence and Investment Timing Decision in Taiwanese Domestic Equity Mutual Funds written by Tony Chieh-tse Hou and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Purpose - The purpose of this paper is to investigate whether mutual fund investors can make effective cash flow timing decisions and examine the sensitivity of these decisions to past fund performance using cash flow data at the individual fund level.Design/Methodology/Approach - This study examines performance persistence and investor timing ability of 200 domestic equity mutual funds in Taiwan between 1996 and 2009. In particular, a performance gap measuring the difference between dollar-weighted average monthly returns and geometric average monthly returns is used to evaluate investors' timing ability.Findings - The empirical results show that funds that have performed well (poorly) in the previous year tend to continue performing well (poorly) in the following year, and investors' timing performance is negatively related to fund performance. The results also show that investors' timing performance is significantly and negatively related to fund size, length of fund history, and momentum-style of funds, but positively related to value-style funds. These results suggest that mutual fund investors are loss-averse and demonstrate return-chasing behavior in well-performing funds.Originality/Value - The paper contributes to the mutual fund performance literature by proposing an integrated framework that jointly tests fund performance and how it affects investors' cash flow timing decisions. Furthermore, the paper individually measures investors' timing sensitivity for the current best (worst) performance funds and consecutive two-year best (worst) performance funds, and contributes to a growing body of research on the behavior of mutual fund investors.

Download or read book Performance Performance Persistence and Fund Flows written by Yuansu Ge and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

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 2011-01-22 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.

Download or read book Performance Perfomance Persistence and Fund Flows written by Yuansu Ge and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Is Money Really smart written by Russ Wermers and published by . This book was released on 2003 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Mutual Fund Flows and Performance Streaks How Mutual Fund Selection is Driven by Behavioural Biases written by Kai Aschick and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Short Term Persistence in Mutual Fund Market Timing and Stock Selection Abilities written by Evangelos Benos and published by . This book was released on 2009 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using daily return data from 448 actively managed mutual funds over a recent 9-year period, we look for persistence, over two consecutive quarters, in the ability of funds to select individual stocks and time the market. That is, we decompose overall fund performance into excess returns resulting from stock selection and timing abilities and we separately test for persistence in each ability. We find persistence in the ability to time the market only among well performing funds and in the ability to select stocks only among the very best and worst performers. The existing literature patterns appear only when funds are ranked by their overall performance, which includes stock selection, market timing and fees. With respect to overall performance, there is persistence among most poorly performing and only the top well performing funds. Furthermore, the profitability of a winner-picking strategy depends on the rebalancing frequency and potentially the size of the investment. Small investors cannot profit, whereas large investors can take advantage of the class A share fee structure and realize positive abnormal returns by annually rebalancing their portfolios.

Download or read book Returns Chasing Behavior Mutual Funds and Beta s Death written by Jason J. Karceski and published by . This book was released on 2000 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: I develop an agency model where returns-chasing behavior by mutual fund investors causes beta not to be priced to the degree predicted by the standard CAPM. Mutual fund investors chase returns through time, precipitating unusually large aggregate cash inflows into mutual funds just after dramatic market runups. Mutual fund investors also chase returns cross-sectionally across funds. Each period, mutual funds compete in tournaments where the highest-performing funds capture the largest fraction of the aggregate inflows into the mutual fund sector. The interaction between these two flow-performance relationships induces an asymmetry in payoffs to mutual funds such that equity fund managers care most about outperforming peers during bull markets. Since high-beta stocks tend to outperform low-beta stocks in up markets, active fund managers tilt their portfolios toward high-beta stocks, reducing the expected return to these securities in equilibrium. Thus, the presence of actively-managed mutual funds causes beta risk to be priced to a lesser degree than otherwise. Interestingly, the literature suggests that beta died in the early 1980s, coinciding with the spectacular growth of the mutual fund industry in the U.S. To support the model's time-series flow-performance assumption, I show empirically that market returns have a large economic impact on subsequent aggregate mutual fund flows. In addition, data on mutual fund holdings support the model's prediction that the aggregate stock portfolio held by equity mutual funds is over-weighted in high-beta stocks relative to the overall market.

Download or read book On Persistence in Mutual Fund Performance written by Mark M. Carhart and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a sample free of survivor bias, I demonstrate that common factors in stock returns and investment expenses almost completely explain persistence in equity mutual funds' mean and risk-adjusted returns. Hendricks, Patel and Zeckhauser's (1993) quot;hot handsquot; result is mostly driven by the one-year momentum effect of Jegadeesh and Titman (1993), but individual funds do not earn higher returns from following the momentum strategy in stocks. The only significant persistence not explained is concentrated in strong underperformance by the worst-return mutual funds. The results do not support the existence of skilled or informed mutual fund portfolio managers.

Download or read book A Mispricing Based Explanation of How Flow Affects Mutual Fund Performance written by André de Souza and published by . This book was released on 2013 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using fund raw return as a proxy for unsophisticated flows, I find that future fund performance increases in alpha and decreases in flow. I show that funds holding stocks which, in aggregate, have been sold by funds with low flows do better in the future. Such stocks have had their prices pushed down, and therefore outperform. A measure of these “aggregate flow-induced sales” of a fund's portfolio largely subsumes raw return in predicting future fund performance. These results have implications for the debate on whether flows are responsible for the lack of mutual fund performance persistence.

Download or read book Skill and Persistence in Mutual Fund Returns written by Bradford D. Jordan and published by . This book was released on 2016 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: The addition of the Fama and French (2015) profitability (RMW) and investment (CMA) factors to the standard four-factor model reveals persistent positive alpha after fees for mutual funds. Over the period 2000-2014, about 65 percent of fund managers have at least some skill, and about 15 percent have skill in excess of fees. The best performing funds have significant negative exposures to both factors, while the worst performing funds have significant positive exposures. Because of that pattern, failure to account for these factors masks a difference in alpha between the best and worst performers of almost 7 percent per year.

Download or read book Mutual Fund Flows Performance Persistence and Manager Skill written by Yan Albert Wang and published by . This book was released on 2014 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper adapts the model of Berk and Green (2004) to explain with reasonable success the data on mutual fund returns and flows. Using a Bayesian measure of fund-manager skill that controls for fund flows, I find that posterior estimates of skill vary substantially in the cross section and that perceived differences in ability persist through time. Consistent with the model, investor fund flows respond in a convex manner to posterior updates of manager skill scaled by functions of the expense ratio, and this result is robust after including a convex function of past performance. While cross-sectional variation in posterior skill estimates has predictive power for out-of-sample subsequent fund performance, such predictability is present only in the short run. Beyond one year, high-skilled managers do not consistently out-perform low-skilled managers as skill-chasing fund flows equalize the realized abnormal fund returns across managers. Overall, my empirical evidence is consistent with some managers possessing high ability, investors rationally chasing returns generated by those managers, and lack of long-run persistence in fund returns due to equilibrating fund flows and diseconomies of scale in assets under management. Outside of the model, I show that the cross-sectional distribution of managerial ability is related to fund style and fund-manager compensation in a way that is consistent with matching the managerial productivity to the nature of the underlying portfolio.

Download or read book Mutual Fund Flows and Performance in Rational Markets written by Jonathan B. Berk and published by . This book was released on 2002 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: