Download or read book Three Essays on the Performance Evaluation of Actively Managed Investment Funds written by Qing Yan and published by . This book was released on 2021 with total page 240 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation investigates the performance of hedge funds and actively managed U.S. equity mutual funds. The first chapter examines the relation between hedge funds and the low beta anomaly. Different conditions in the mutual fund and hedge fund industries should lead to different approaches with respect to the low beta anomaly. I find that, unlike most mutual funds, the average hedge fund tends to benefit considerably from the anomaly. About 2.3% per year of apparent alpha for the average hedge fund can be attributed to the low beta anomaly rather than manager skill. Low skill managers are the most reliant on the anomaly to generate returns, with the most reliant underperforming the least reliant by 5.9% per year. The second chapter uses machine learning to dynamically identify and optimally combine the predictors of hedge fund performance. The portfolio formed based on the machine learning models has an out-of-sample alpha of 7.8% per year. The importance of each predictor varies over time, but among the 22 predictors I consider, the consistently important predictors are average return, maximum return, alpha, systematic risk, and beta activity. Machine learning provides valuable, unique information about future hedge fund performance that is not captured by individual predictors. The third chapter studies whether the quality of fund risk management can predict fund performance. I find that the risk management skills of mutual fund managers-as quantified by their funds' maximum drawdowns-are persistent and predictive of subsequent risk-adjusted performance. Funds with relatively strong past performance and relatively low past maximum drawdowns have, on average, an out-of-sample alpha of 2.68% per year. That alpha is magnified when markets are turbulent-a time during which risk management skills should be most valuable. Investors are averse to drawdown risk. After controlling for typical measures of past performance, fund flows are still a decreasing function of maximum drawdowns, particularly among investors with greater risk aversion and during times of generally heightened risk aversion.

Download or read book Essays on Performance of Actively Managed Mutual Funds written by Claudia Peitzmeier and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Perspectives of Mutual Fund Performance written by Steve A. Nenninger and published by . This book was released on 2009 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book The Behavior of Institutional Investors written by Alexander Pütz and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Institutional investors such as mutual funds and hedge funds play an important role in today's financial markets. This thesis consists of three essays which empirically study the behavior of active fund managers. In particular, the first essay investigates whether managers behave rationally or if some of them unconsciously make wrong investment decisions due to behavioral biases. The second essay examines whether some managers intentionally act to solely advance their own interests by strategically valuing the security positions in their portfolio. The third essay analyzes what the managers' education reveals about their investment behavior.

Download or read book Essays on Mutual Fund Performance and Predictability written by Yu Xia and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This thesis consists of two essays on evaluating mutual fund performance and its predictability. In the first essay, I study the ex ante predictability of 12 well-known predictors for fund performance from investors' perspective. The 12 predictors cover three major categories: fund characteristics, fund performance, and holding-based activeness measures, which are constructed using real-time information. For performance evaluation, I exploit two types of fund picking strategies with either rule-based approach or machine learning methods and find that utilizing machine learning can deliver superior real-time economic gains for investors with fund short-term performance being the primary driver underlying predictability. Specifically, using variable selection methods such as LASSO and elastic net at individual predictor level can generate annual 1.3%-1.7% real-time alphas after adjusting for standard risk factors. The essay further examines whether real-world investors react to those well-known predictors when evaluating mutual fund performance. Using a novel approach to decomposing fund returns, I find that conditional on investors' usage of CAPM, investors react to the components of CAPM alpha implied by predictors in different ways, and investor reaction to predictive information embedded in predictors is stronger within aggressive growth funds. These results provide empirical support for Gârleanu and Pedersen (2018) and suggest ex ante predictability exists not due to lack of investor reaction but as the compensation for employing costly algorithms to identify skilled managers.The second essay examines how decision-making hierarchy in team-managed U.S. equity mutual funds affects their performance and risk-taking behavior. Employing a unique hand-collected dataset, we find that vertically-managed funds with lead managers earn 75 bps per year lower Fama-French five-factor alpha than their horizontally-managed counterparts. Moreover, vertically-managed funds hold less concentrated portfolios and are exposed to lower residual risk, thus showing signs of inferior security selection ability. Using mutual fund industry as a laboratory, the second essay provides evidence supporting a horizontal decision-making structure in organizations functioning in an uncertain expectation environment. These results echo similar mechanisms as in recent cross-country studies on the benefits of democratic form of government for country's economic growth"--

Download or read book Portfolio Performance Evaluation written by George O. Aragon and published by Now Publishers Inc. This book was released on 2008 with total page 123 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a review of the methods for measuring portfolio performance and the evidence on the performance of professionally managed investment portfolios. Traditional performance measures, strongly influenced by the Capital Asset Pricing Model of Sharpe (1964), were developed prior to 1990. We discuss some of the properties and important problems associated with these measures. We then review the more recent Conditional Performance Evaluation techniques, designed to allow for expected returns and risks that may vary over time, and thus addressing one major shortcoming of the traditional measures. We also discuss weight-based performance measures and the stochastic discount factor approach. We review the evidence that these newer measures have produced on selectivity and market timing ability for professional managed investment funds. The evidence includes equity style mutual funds, pension funds, asset allocation style funds, fixed income funds and hedge funds.

Download or read book Three Essays in Measuring Mutual Fund Performance written by Fan Hu and published by . This book was released on 1997 with total page 238 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on the Performance of Actively Managed Mutual Funds written by Ulf Herrmann and published by . This book was released on 2013 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on the Performance Evaluation of Equity Mutual Funds written by Bernhard Breloer and published by . This book was released on 2014 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Investor and Mutual Fund Behavior written by Andrew John Caffrey and published by . This book was released on 2006 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays on the relations among investors, mutual funds, and fund families. Chapter one presents a model of new fund openings as a function of the past performance of a family's existing funds. At the fund level, we model the relations among fund performance, investment flows, and the risk-taking behavior of the fund manager. Our model predicts that families dominated either by outperforming funds or by underperforming funds are more likely to open a new fund than are families composed of average performers. We predict that an asymmetric performance-fund flow relation combined with expected intra-family flows from existing underperformers to a new fund provide an incentive for families with severely under-performing funds to open a new fund in hopes of managing a `star'. Chapter two presents an empirical analysis of new fund openings. We study fund performance, investment flows, and risk level and examine the relation between the distribution of performance across funds within a family and new fund openings. We find that new fund openings are positively correlated with measures of both extreme underperformance and extreme outperformance of existing funds as well as measures of the number of `dog' funds within a family. The evidence supports our predictions in Chapter 1. Chapter three addresses the relation between advisory firm organization and mutual fund performance and expenses. Specifically, we hypothesize three relations. First, the ownership structure of a fund family--mutualized, privately held, or publicly owned--may impact fund manager behavior and be reflected in expenses and/or performance. Second, fund families may experience some net pecuniary benefit or harm as a result of subsidiary affiliation. Finally, we examine expense and performance differences across directly advised versus subadvised funds. We find evidence that publicly owned fund families provide investors with lower style-adjusted returns and alpha at higher cost than do privately owned or mutualized families. Similarly, we find that bank and insurance affiliates underperform their peers in both returns net of expenses and alpha net of expenses, and that diversified financial services affiliates outperform in these measures.

Download or read book Essays on Mutual Fund Performance Evaluation written by Thomas C. H. Sandvall and published by . This book was released on 1999 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Institutional Investor Behavior written by Viktoriya Lantushenko and published by . This book was released on 2016 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of one chapter studying mutual fund active management and two chapters examining institutional trading in various settings. The three essays in my dissertation explore institutional investor behavior. My first paper titled "Innovation in mutual fund portfolios: Implications for fund alpha" introduces a new measure of portfolio holdings that has power to explain future fund abnormal returns. This measure is defined as "return on portfolio innovation." It is constructed as the return on completely new portfolio positions that a fund has not held before. I evaluate the return on newly added positions because their performance can signal the quality of managerial effort. On average, a one-standard deviation increase in the return on innovation increases the Carhart (1997) four-factor fund alpha by approximately 0.34 to 0.52 percent per year. The results have important implications for fund performance and manager behavior. The second essay titled "Institutional property-type herding in real estate investment trusts," with Edward Nelling, explores whether institutional investors exhibit herding behavior by property type in real estate investment trusts (REITs). Our analysis of changes in institutional portfolio holdings suggests strong evidence of this behavior. We analyze the autocorrelation in aggregate institutional demand, and find that most of it is driven by institutional investor following the trades of others. Although momentum trading explains a small amount of this herding, institutional property type demand is more strongly associated with lagged institutional demand than lagged returns. The results suggest that correlated information signals drive herding in REITs. In addition, we examine the extent to which herding in REIT property types affects price performance in the private real estate market. We find that information transmission resulting from institutional herding in REITs occurs faster in public real estate markets than in private markets. The final essay titled "Investing in innovation: Evidence from institutional trading around patent publications," with Edward Nelling, examines institutional trading activity around patent publication dates. Unlike previous studies that use the future citations count to proxy for patent value, we measure the value of innovation by the three-day cumulative abnormal returns (CARs) around announcements. We find an increase in institutional demand for a firm's shares around patent announcements, and this increase is correlated with announcement returns. In addition, the increase in demand is greater when the firm's shareholder base consists of a higher percentage of long-term institutions. We find no correlation between patent announcement returns and the future number of citations. Patent announcements are also associated with increases in liquidity and analyst coverage, indicating that innovation may reduce information uncertainty between a firm and its investors. In addition, firms that announce patents outperform those in a control sample over a long-run. Overall, our results suggest that both investors and firms benefit from innovation.

Download or read book Mutual fund performance and the incentive to invest in active management written by Diane Del Guercio and published by . This book was released on 2011 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is well known that within U.S. domestic equity mutual funds, actively managed funds significantly underperform index funds. However, this comparison ignores the fact that mutual funds targeted at different types of investors charge different fees, and use these fees to provide different bundles of services. To control for these differences, we compare the performance of actively managed funds and index funds within each of three broad market segments: retail funds sold directly to investors, retail funds sold through brokers, and institutional funds. We find that underperformance is strongest in the broker-sold segment and weakest in the direct-sold segment. In fact, we find that within the direct-sold segment, the risk-adjusted, after-fee returns of actively managed funds are statistically indistinguishable from those of index funds, consistent with the equilibrium condition in Grossman and Stiglitz (1980). To rationalize differences in performance, we test for differences in the flow-performance relation across the three segments. We find that fund flows respond most strongly to risk-adjusted returns in the direct-sold segment. We find a wide variety of evidence that direct-sold funds respond to investor preferences for risk-adjusted performance by investing more in active management. Our findings suggest that the underperformance of the average actively managed fund reflects its weaker incentives to generate alpha rather than an inability to generate alpha. We argue that our findings also help to explain the continued demand for actively managed funds.

Download or read book Essays on Mutual Funds Performance written by Lubomira Ivanova and published by . This book was released on 2005 with total page 156 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first chapter of my dissertation I present a survey of the literature on mutual fund performance. The first section of chapter one discusses two approaches to portfolio evaluation. The returns-based approach evaluates the net portfolio returns of the funds. The second, holdings-based approach, directly measures the stock-picking talent of mutual fund managers by focusing on manager's equity holdings. The second section of chapter one presents the literature on flows of funds and its relationship to portfolio evaluation.

Download or read book A Dynamic Model of Active Portfolio Management and Mutual Fund Performance Evaluation written by Yonggan Zhao and published by . This book was released on 2005 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze an optimal dynamic portfolio and asset allocation policy for investors who are concerned with the performances of their portfolios relative to a benchmark. Assuming that asset returns follow a multi-linear factor model similar to the structure of Ross (1976) and that portfolio managers adopt a mean tracking error analysis similar to Roll (1992), we develop a dynamic model of active portfolio management maximizing risk adjusted excess return over a well-diversified benchmark. Unlike the case of constant proportional portfolios for the standard utility maximization, our optimal portfolio policy is state dependent, namely a function of time to investment horizon, the return on the benchmark portfolio, and the return on the investment portfolio itself. Based on the analysis in this paper, we define a dynamic performance measure which relates portfolio's return to its risk sensitivity. Abnormal returns at each point in time are quantified as the difference between the realized and the model-fitted returns. Risk sensitivity is estimated through a dynamic matching that minimizes the total fitted error of portfolio returns. We study portfolio performances for a sample of U.S. mutual funds with the data from January 2001 to December 2003. To limit biases in the selection of a benchmark for portfolio evaluation, we assume that the benchmark portfolio is the minimum variance portfolio composed of the Dow Jones Industrial Average index and the Nasdaq 100 index components. We find that majority of the mutual funds have substantially under-performed the chosen benchmark. Our model also implies an interesting relationship between performance indices and risk sensitivities. For the three year data, the empirical analysis shows that portfolio performance indices are related to their estimated risk sensitivities in an open-upward quadratic curve.

Download or read book Internal Performance Evaluation of Managed Investment Funds written by Frank James Finn and published by . This book was released on 1981 with total page 450 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book How Useful is the Information Ratio to Evaluate the Performance of Portfolio Managers written by Christoph Schneider and published by BoD – Books on Demand. This book was released on 2010 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: The idea of comparing the performance of different risky investments, for example investment funds, on a quantitative basis dates back to the beginnings of the asset management industry and has been an important field of research in finance since then. Performance measures serve as valuable quantitative evidence for the portfolio manager's performance as well as for the evaluation of investment decisions ex post. Based on the idea of the capital asset pricing model proposed by Treynor, Sharpe and Lintner, Treynor developed the first quantitative performance measure intended to rate mutual funds, the Treynor Ratio. Since then, a large number of performance measures with very different characteristics have been developed. In addition to their power of rating investments ex post, their ability to predict future performance has been thoroughly analyzed by Grinblatt & Titman, Brown & Goetzmann, Carhart and others. Besides academia, the driving force behind the development of more sophisticated performance measures has always been the investors. This is understandable, as "the truly poor managers are afraid, the unlucky managers will be unjustly condemned, and the new managers have no track record. Only the skilled (or lucky) managers are enthusiastic". By combining and applying the results of previous research to a new sample of nearly 10,000 mutual funds that invest in different countries and asset classes, this thesis clarifies its central research question: Is the Information Ratio a useful and reliable performance measure? In order to answer this central question, it has been split up into the following sub-parts: What are the characteristics of a useful and reliable performance measure? What actually is "good" performance? Is the "good" performance a result of luck or of skilled decisions and does it persist over time? How does the Information Ratio compare to other performance measures, and what are its strengths and weaknesses? This empirical study aims at answering all of these questions and provides a framework for performance evaluation by use of the Information Ratio.