The authors propose that attempts to increase consumers' objective knowledge (OK) regarding financial instruments can deter willingness to invest when such attempts diminish consumers' subjective ...knowledge (SK). In four studies, the authors use different SK manipulations and investment products to show that investment decisions are influenced by SK, independent of OK. Specifically, they find that (1) willingness to pursue a risky investment increases when SK is high (vs. low) relative to a prior investment choice (Study 1); (2) willingness to enroll in a retirement saving program is enhanced by asking consumers an easy (vs. difficult) question about finance, thereby increasing SK (Study 2); (3) technically elaborating information about a mutual fund diminishes SK regarding that investment and decreases choice of that fund (Study 3); and (4) consumers invest less money in funds when missing information is made salient, holding the objective investment information constant (Study 4). Furthermore, the effects in Studies 2-4 are mediated by participants' self-rated SK. The authors propose that effective financial education must focus not only on imparting relevant information and enhancing OK but also on promoting higher levels of SK.
The existing literature treats the short side (i.e., short selling) and the long side of hedge fund trading (i.e., fund holdings) independently. The two sides, however, complement each other: ...opposite changes in the two are likely to be driven by information, whereas simultaneous increases (decreases) of the two may be motivated by hedging (unwinding) considerations. We use this intuition to identify informed demand and document that it exhibits highly significant predictive power over returns (approximately 10% per year). We also find that informed demand forecasts future firm fundamentals, suggesting that hedge funds play an important role in information discovery.
Dominant institutional owners and firm value Ruiz-Mallorquí, María Victoria; Santana-Martín, Domingo J.
Journal of banking & finance,
2011, 2011-1-00, 20110101, Letnik:
35, Številka:
1
Journal Article
Recenzirano
This research analyzes the impact of control by dominant institutional owners (banking institutions and investment funds) on firm value. The analysis considers the level of voting rights in the hands ...of the dominant institutional owner and other large shareholders. The results reveal a different effect on value depending on whether the dominant institutional investor is a banking institution or an investment fund. Moreover, the results show that the presence of other large shareholders affects firm value when a dominant institutional owner controls the firm.
Indirect Incentives of Hedge Fund Managers LIM, JONGHA; SENSOY, BERK A.; WEISBACH, MICHAEL S.
The Journal of finance (New York),
April 2016, Letnik:
71, Številka:
2
Journal Article
Recenzirano
Indirect incentives exist in the money management industry when good current performance increases future inflows of capital, leading to higher future fees. For the average hedge fund, indirect ...incentives are at least 1.4 times as large as direct incentives from incentive fees and managers' personal stakes in the fund. Combining direct and indirect incentives, manager wealth increases by at least $0.39 for a $1 increase in investor wealth. Younger and more scalable hedge funds have stronger flow-performance relations, leading to stronger indirect incentives. These results have a number of implications for our understanding of incentives in the asset management industry.
We apply a new bootstrap statistical technique to examine the performance of the U.S. open-end, domestic equity mutual fund industry over the 1975 to 2002 period. A bootstrap approach is necessary ...because the cross section of mutual fund alphas has a complex nonnormal distribution due to heterogeneous risk-taking by funds as well as nonnormalities in individual fund alpha distributions. Our bootstrap approach uncovers findings that differ from many past studies. Specifically, we find that a sizable minority of managers pick stocks well enough to more than cover their costs. Moreover, the superior alphas of these managers persist.
The Economics of Private Equity Funds Metrick, Andrew; Yasuda, Ayako
The Review of financial studies,
06/2010, Letnik:
23, Številka:
6
Journal Article
Recenzirano
Odprti dostop
This article analyzes the economics of the private equity industry using a novel model and dataset. We obtain data from a large investor in private equity funds, with detailed records on 238 funds ...raised between 1993 and 2006. We build a model to estimate the expected revenue to managers as a function of their investor contracts, and we test how this estimated revenue varies across the characteristics of our sample funds. Among our sample funds, about two-thirds of expected revenue comes from fixed-revenue components that are not sensitive to performance. We find sharp differences between venture capital (VC) and buyout (BO) funds. BO managers build on their prior experience by increasing the size of their funds faster than VC managers do. This leads to significantly higher revenue per partner and per professional in later BO funds. The results suggest that the BO business is more scalable than the VC business and that past success has a differential impact on the terms of their future funds.
We examine the product market spillover effects of hedge fund activism (HFA) on the industry rivals of target firms. HFA has negative real and stockholder wealth effects on the average rival firm. ...The effects on rivals' product market performance is commensurate with post-activism improvements in target's productivity, cost and capital allocation efficiency, and product differentiation. Financially constrained rivals accommodate these improvements but those facing high intervention threat respond effectively to them. The spillover effects are strengthened in less concentrated and low entry barrier industries. The results are robust to the alternative hypothesis of strategic target selection by hedge funds.
We study the effects of U.S. monetary policy on international mutual fund investment. We apply a novel variant of the shock identification procedure in Bu et al. (2021) to decompose observed U.S. ...monetary policy surprises into pure monetary policy shock and information news shock components. An increase in interest rates driven by a pure monetary policy shock leads to large and persistent outflows from emerging markets (EMs) and to a lesser extent global funds. On the other hand, increases in interest rates driven by positive information news shocks (i) do not cause outflows from EM funds, and (ii) lead investors to reallocate capital out of safe U.S. bond funds and into growth-sensitive U.S. and global equity funds. We attribute these differences to the risk-taking channel of monetary policy. Pure monetary policy shocks heighten risk aversion, while information news shocks lower uncertainty.
This study tests for financial constraints on R&D investment and how they differ from capital investment. To identify constraints in the access to external capital, we employ a credit rating index. ...Our models show that internal constraints, measured by mark-ups, are more decisive for R&D than for capital investment. For external constraints, we find a monotonic relationship between the level of constriction and firm size for both types of investment. Thus, external constraints turn out to be more binding with decreasing firm size. On the contrary, we do not find such monotonie relationships for internal constraints. Differentiation by firms' age does not support lower constraints for older firms.
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