Prior studies have documented that pension plan sponsors often monitor a fund's performance relative to a benchmark. We use a first-difference approach to show that in an effort to beat benchmarks, ...fund managers controlling large pension assets tend to increase their exposure to high-beta stocks, while aiming to maintain tracking errors around the benchmark. The findings support theoretical conjectures that benchmarking can lead managers to tilt their portfolio toward high-beta stocks and away from low-beta stocks, which can reinforce observed pricing anomalies.
We ask whether mutual funds' flows reflect the incentives of the brokers intermediating them. The incentives we address are those revealed in statutory filings: the brokers' shares of sales loads and ...other revenue, and their affiliation with the fund family. We find significant effects of these payments to brokers on funds' inflows, particularly when the brokers are not affiliated. Tracking these investments forward, we find load sharing, but not revenue sharing, to predict poor performance, consistent with the different incentives these payments impart. We identify one benefit of captive brokerage, which is the recapture of redemptions elsewhere in the family.
City size and fund performance Christoffersen, Susan E.K.; Sarkissian, Sergei
Journal of financial economics,
05/2009, Letnik:
92, Številka:
2
Journal Article
Recenzirano
The literature predicts that the average skill level and productivity are higher in larger cities. Prior studies use workers’ wage or education differentials to indirectly link city size and output. ...This article relates city size and productivity directly, using performance data of U.S. equity mutual funds. On average, funds in financial centers perform better than other funds in terms of both gross and risk-adjusted returns, but this difference is driven only by more experienced managers. Among funds in financial centers there is strong evidence of a positive relation between performance and manager experience in a given city, especially among New York funds. More importantly, we observe performance improvements of the same manager at the same fund in financial centers but not elsewhere. Our tests provide novel evidence of knowledge spillovers and learning in cities.
We explore the properties of equity mutual funds that experience a loss of assets after poor performance. We document that both inflows and outflows are less sensitive to performance, because ...performance-sensitive investors leave or decide not to invest after bad performance. Consistent with the idea that attrition measures the sorting of performance-sensitive investors, we find that attrition has less of an impact on the fund’s flow–performance sensitivity for institutional funds where there is less dispersion in investor performance sensitivity. Also, attrition has no effect on the flow–performance sensitivity when attrition arises after good performance or investors invest for nonperformance reasons.
Vote Trading and Information Aggregation CHRISTOFFERSEN, SUSAN E.K.; GECZY, CHRISTOPHER C.; MUSTO, DAVID K. ...
The Journal of finance (New York),
December 2007, Letnik:
62, Številka:
6
Journal Article
Recenzirano
Odprti dostop
The standard analysis of corporate governance assumes that shareholders vote in ratios that firms choose, such as one share-one vote. However, if the cost of unbundling and trading votes is ...sufficiently low, then shareholders choose the ratios. We document an active market for votes within the U.S. equity loan market, where the average vote sells for zero. We hypothesize that asymmetric information motivates the vote trade and find support in the cross section. More trading occurs for higher-spread and worse performing firms, especially when voting is close. Vote trading corresponds to support for shareholder proposals and opposition to management proposals.
Demand Curves and the Pricing of Money Management Susan E. K. Christoffersen; Musto, David K.
Review of financial studies/The Review of financial studies,
2002, Letnik:
15, Številka:
5
Journal Article
Recenzirano
Odprti dostop
One reason why funds charge different prices to their investors is that they face different demand curves. One source of differentiation is asset retention: Performance-sensitive investors migrate ...from worse to better prospects, taking their performance sensitivity with them. In the cross-section we show that past attrition significantly influences the current pricing of retail but not institutional funds. In time-series we show that the repricing of retail funds after merging in new shareholders is predicted by the estimated effect on its demand curve. This result is robust to other influences on repricing, including asset and account-size changes.
Cash flows between investors and funds are both cause and effect in a complex web of economic decisions. Among the issues at stake are the prospects and fees of the funds, the efforts and risk ...choices by the funds’ managers, the pricing and comovement of the assets they trade, the stability of the financial system and the real economy, and the retirement security and protection of the investors. There is an accordingly large and growing literature on flows that has concentrated on the main retail investment pool, the open-end mutual fund, and has used flows to explore many aspects of retail financial decision making. We survey this literature and, where relevant, describe how open-end flows compare to other investment vehicles. We also identify opportunities both for future research and for refinement of mutual fund design, in particular as suggested by the recent rethinking of retail investment pools in the European Union.
The demographics of fund turnover Christoffersen, Susan E.K.; Sarkissian, Sergei
Journal of financial intermediation,
07/2011, Letnik:
20, Številka:
3
Journal Article
Recenzirano
Odprti dostop
This article documents various demographic factors which influence mutual fund turnover including managerial experience, location, education, and gender. On average, funds in financial centers trade ...more but this excess turnover declines with experience. While most extra trading is concentrated among less experienced managers in financial centers, they do not outperform inexperienced managers located in smaller towns. Furthermore, managers in financial centers increase trading after good performance. This result is particularly strong for inexperienced, more educated male fund managers investing in growth stocks and located in New York. Our results provide strong evidence that demographic factors influence fund manager trading behavior.
Abstract
Active mutual funds supply liquidity when demanding it becomes uneconomical. They tilt toward cheaper buy trades after inflows deplete their trading ideas, when trading ideas in general run ...low, and when they have more stocks to supply liquidity to, and their cheaper trades perform worse. Their largest trades are more likely to supply liquidity, explaining why they were not broken up. Funds perform better when they pay more for their buys and perform worse when they pay more for their sells, consistent with the implied value of the trades and the correlation between what a fund trades and what it holds.
Over half of money fund managers voluntarily waive fees they have a contractual right to claim. Moreover, as a consequence of fee waivers, funds on average collect one half of reported expense ...ratios. Variation in fee waivers is significant and relates to differences in relative performance. Both low-performing retail and institutional funds waive fees to improve their net performance. More interestingly, high-performing retail, but not institutional, funds use fee waivers to strategically adjust net performance to increase expected fund flows. Despite fund flow incentives, high-performing institutional funds do not waive more because they cannot significantly improve their relative performance.
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