Liquidity Style of Mutual Funds

Idzorek, Thomas M.; Xiong, James X.; Ibbotson, Roger G.

doi:10.2139/ssrn.1789906

Cited by 9 publications

(4 citation statements)

References 7 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…For mutual fund markets, the relationship between liquidity and risk‐adjusted rate of return is revealed by Idzorek, Xiong, and Ibbotson (), who investigate whether mutual funds that hold less liquid stocks tend to outperform those that hold more liquid stocks. They first group the population of mutual funds under consideration by size and valuation, and then categorize the funds in each group into five liquidity levels on the basis of the stock‐level “turnover” measure.…”

Section: Discussionmentioning

confidence: 99%

Dynamic Longevity Hedging in the Presence of Population Basis Risk: A Feasibility Analysis From Technical and Economic Perspectives

Zhou¹,

Li²

2016

J of Risk & Insurance

View full text Add to dashboard Cite

In this article, we study the feasibility of dynamic longevity hedging with standardized securities that are linked to broad‐based mortality indexes. On the technical front, we generalize the dynamic “delta” hedging strategy developed by Cairns (2011) to incorporate the situation when population basis risk exists. On the economic front, we discuss the potential financial benefits of an index‐based hedge over a bespoke risk transfer. By considering data from a large group of national populations, we find evidence supporting the diversifiability of population basis risk. We further propose a customized surplus swap—executed between a hedger and reinsurer—to utilize the diversifiability. As standardized instruments demand less illiquidity premium, a combination of a dynamic index‐based hedge and the proposed customized surplus swap may possibly be a more economical (and equally effective) alternative to a bespoke risk transfer.

show abstract

Section: Discussionmentioning

confidence: 99%

Dynamic Longevity Hedging in the Presence of Population Basis Risk: A Feasibility Analysis From Technical and Economic Perspectives

Zhou¹,

Li²

2016

J of Risk & Insurance

View full text Add to dashboard Cite

show abstract

“…Ibbotson et al (2013) termed it as \before the fact" measure of liquidity. Idzorek et al (2012) show that turnover exhibits greater explanatory power for U.S. mutual fund returns. among others, note that Fama and French's (1993) three-factor model of Eq.…”

Section: Multifactor Modelsmentioning

confidence: 88%

Tests of Alternative Asset Pricing Models Using Individual Security Returns and a New Multivariate F-Test

Rahman,

Schneider,

Antonacci

2015

SSRN Journal

View full text Add to dashboard Cite

This paper examines relative performance of alternative asset pricing models using individual security returns. The standard multivariate test used in studies comparing the performance of asset pricing models requires the number of stocks to be less than the number of time series observations, which requires grouping stocks into portfolios. This results in a loss of disaggregate stock information. We apply a different statistical test to overcome this problem and to investigate relative performance of alternative asset pricing models using individual security returns instead of portfolio returns. Our findings suggest that a parsimonious six-factor model that includes the momentum and orthogonal value factors outperforms all other models based on a number of measures as well as the average F-test. Unlike the standard multivariate test, we find that the average F-test has superior power to discriminate among competing models and does not reject all tested models. used individual stock data in testing asset pricing models. Chordia et al. (2015) and Gagliardini et al. (2016) focused on risk premium estimation from crosssectional regressions of individual stock returns on factor loadings (betas) and firm characteristics. On the contrary, we present a simple and intuitive way of examining relative performance of alternative models by focusing on the magnitude and significance of intercept from regression (pricing error). The key difference between our paper and Jegadeesh et al.(2015) will be discussed in a later section.

show abstract

“…They find that small-cap mutual funds earn excess return by buying less liquid stocks and selling more liquid stocks, with this pattern being pronounced in value funds. Similarly, Idzorek, Xiong and Ibbotson (2011) find that 'mutual funds that hold relatively less liquid stocks from within the liquid universe of publicly traded stocks outperform mutual funds that hold relatively more liquid stocks' (p. 16), after controlling for the funds' investment styles and risk variables. These findings are consistent with the liquidity-based asset pricing theory of Amihud and Mendelson (1986a) and the analysis here.…”

Section: Dynamic Liquidity Managementmentioning

confidence: 90%

Global Asset Management

Pinedo¹,

Walter²

2013

View full text Add to dashboard Cite

Liquidity Style of Mutual Funds

Cited by 9 publications

References 7 publications

Dynamic Longevity Hedging in the Presence of Population Basis Risk: A Feasibility Analysis From Technical and Economic Perspectives

Dynamic Longevity Hedging in the Presence of Population Basis Risk: A Feasibility Analysis From Technical and Economic Perspectives

Tests of Alternative Asset Pricing Models Using Individual Security Returns and a New Multivariate F-Test

Global Asset Management

Contact Info

Product

Resources

About