The Portfolio Choices of Young and Old Active Mutual Fund Managers

Chapman, David A.; Evans, Richard B.; Xu, Zhe

doi:10.2139/ssrn.1021363

Cited by 17 publications

(9 citation statements)

References 26 publications

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“…This structure is similar to, for instance, Chapman, Evans, and Xu () and Basak, Pavlova, and Shapiro (), who also assume that the variable component of the manager's compensation is proportional to assets under management.…”

mentioning

confidence: 72%

“…Alternatively, the model can be extended to allow for nonlinearities in the flow‐performance relationship. However, the convexities found in the data may be too weak to have an economically significant impact on optimal policies (Chapman, Evans, and Xu ()).…”

Section: Model and The Optimal Investment Strategymentioning

confidence: 99%

“…See, for instance, Chevalier and Ellison (), Basak, Pavlova, and Shapiro (), Basak and Makarov (), Chapman, Evans, and Xu (), and Cuoco and Kaniel ().…”

mentioning

confidence: 99%

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The Cross‐Section of Managerial Ability, Incentives, and Risk Preferences

Koijen

2014

The Journal of Finance

104

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I estimate a dynamic investment model for mutual managers to study the crosssectional distribution of ability, incentives, and risk preferences. The manager's compensation depends on the size of the fund, which fluctuates due to fund returns and due to fund flows that respond to the fund's relative performance. The model provides an economic interpretation of time-varying coefficients in performance regressions in terms of the structural parameters. I document that the estimates of fund alphas are precise and virtually unbiased. I find substantial heterogeneity in ability, risk preferences, and pay-for-performance sensitivities that relates to observable fund characteristics.

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mentioning

confidence: 72%

Section: Model and The Optimal Investment Strategymentioning

confidence: 99%

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The Cross‐Section of Managerial Ability, Incentives, and Risk Preferences

Koijen

2014

The Journal of Finance

104

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“…For theoretical models of fees and flows, asset price effects, manager incentive problems, and other aspects of mutual funds, see, for example,Mamaysky and Spiegel (2002),Berk and Green (2004),Kaniel and Kondor (2013),Cuoco and Kaniel (2011), Chien, Cole, and Lustig (2011), Chapman, Evans, and Xu (2010, andPástor and Stambaugh (2012). A number of recent papers in the empirical mutual fund literature also find that some managers have skill, for example,Kacperczyk, Sialm, andZheng (2005, 2008),Kacperczyk and Seru (2007),Cremers and Petajisto (2009), Huang, Sialm, andZhang (2011),Koijen (2014),Baker, Litov, Wachter, and Wurgler (2010).…”

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confidence: 99%

A Rational Theory of Mutual Funds' Attention Allocation

2016

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The question of whether and how mutual fund managers provide valuable services for their clients motivates one of the largest literatures in finance. One candidate explanation is that funds process information about future asset values and use that information to invest in high‐valued assets. But formal theories are scarce because information choice models with many assets are difficult to solve as well as difficult to test. This paper tackles both problems by developing a new attention allocation model that uses the state of the business cycle to predict information choices, which in turn, predict observable patterns of portfolio investments and returns. The predictions about fund portfolios' covariance with payoff shocks, cross‐fund portfolio and return dispersion, and their excess returns are all supported by the data. These findings offer new evidence that some investment managers have skill and that attention is allocated rationally.

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“…1 Papers on the relation between prior performance and subsequent flows include Ippolito (1992), Brown, Harlow, and Starks (1996), Chevalier and Ellison (1997), Goetzmann and Peles (1997), Sirri and Tufano (1998), Koski and Pontiff (1999), Zheng (1999), DelGuercio and Tkac (2002), Lynch and Musto (2003), Berk and Green (2004), Nanda, Wang, and Zheng (2004), Huang, Wei, and Yan (2007), Ivkovich andWeisbenner (2009), Spiegel andZhang (2010), Chapman, Evans, and Xu (2010), Pastor and Stambaugh (2010), and Huang, Sialm, and Zhang (2011). Papers on the relation between manager turnover and fund performance include Chevalier and Ellison (1999), Hu, Hall, and Harvey (2000), Khorana (2001), Massa, Reuter, and Zitzewitz (2010), and Deuskar, Pollet, Wang, and Zheng (2010).…”

Section: Introductionmentioning

confidence: 99%

Spillover Effects in Mutual Fund Companies

Sialm¹,

Tham²

2011

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Our paper investigates spillover effects across different business segments of publicly traded mutual fund management companies. We find that the prior stock price performance of the management company has a significant impact on the money flows and the management turnover of the affiliated mutual funds. Mutual funds managed by poorly performing firms experience unexpectedly low flows of new money and exhibit a significantly higher attrition of fund managers even if the mutual funds themselves performed well. Our results remain strong for companies where mutual funds account for only a small fraction of the overall revenues and hold for both equity and bond mutual funds. These results indicate that the financial health of a diversified firm has a significant impact on the prospects of the various business segments.

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The Portfolio Choices of Young and Old Active Mutual Fund Managers

Cited by 17 publications

References 26 publications

The Cross‐Section of Managerial Ability, Incentives, and Risk Preferences

The Cross‐Section of Managerial Ability, Incentives, and Risk Preferences

A Rational Theory of Mutual Funds' Attention Allocation

Spillover Effects in Mutual Fund Companies

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