Managers beyond borders: side-by-side management in mutual funds and pension funds

Alda, Mercedes

doi:10.1007/s11846-019-00345-4

Cited by 2 publications

(1 citation statement)

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“…In order to estimate the alpha or performance as defined in (2), we apply Carhart's (1997) multifactor model. This model has been widely applied in the previous literature addressing mutual fund performance (e.g., Ammann et al, 2012;Alves, 2014;Lee et al, 2015;Choi et al, 2017;Alda, 2019). It is specified as follows:…”

Section: Performance Methodology and Datamentioning

confidence: 99%

On management risk and price in the mutual fund industry: style and performance distribution analysis

2021

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This study shows how investing in mutual funds involves an additional risk, which we call management risk as a consequence of the uncertainty in the results of active management. To address this issue, we analyze a sample of 2,539 US equity mutual funds. For comparative purposes, we differentiate among index funds and actively managed mutual funds with different investment styles. We observe that performance distribution shows negative mean, negative skewness, and excess kurtosis. Results also show that management risk is not rewarded with higher abnormal performance. Moreover, higher active management prices are linked to funds with higher management risk and negative asymmetry. Therefore, investors seem to be risk-seeking since they are paying more to participate in high asymmetric bets.Finally, we attempt to solve this puzzle from the behavioral finance perspective.

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