We conduct the first comparative analysis of the financial performance of European green, black (fossil energy and natural resource) and conventional mutual funds. Based on a unique dataset of 175 ...green, 259 black and 976 conventional mutual funds, the investigation contrasts the financial performance of the three dissimilar investment orientations over the 1991-2014 period. Over the full sample period, green mutual funds significantly underperform relative to conventional funds, while no significant risk-adjusted performance differences between green and black mutual funds could be established during the same period. Environmentally friendly investment vehicles display a significant exposure to small cap and growth stocks, while black funds are more exposed to value stocks. Remarkably, the green funds' risk-adjusted return profile progressively improves over time until no difference in the performance of the green and the conventional classes could be discerned. Further evidence suggests that the green funds are beginning to significantly outperform their black peers, especially over the 2012-2014 investment window.
Using a comprehensive list of terrorist attacks over three decades, we find that aggregate investor risk aversion inversely relates to terrorist activity in the United States. A one standard ...deviation increase in the number of attacks each month leads to a $75.09 million drop in aggregate flows to equity funds and a $56.81 million increase to government bond funds. Tests on alternative channels further suggest that the shift in aggregate risk aversion is driven mainly by an emotional shock rather than changes in wealth or the outside environment. We also investigate possible alternate explanations for reduced flows to risky assets. Our evidence is consistent with a fear-induced increase in aggregate risk aversion.
The paper provides empirical evidence that strategic complementarities among investors generate fragility in financial markets. Analyzing mutual fund data, we find that, consistent with a theoretical ...model, funds with illiquid assets (where complementarities are stronger) exhibit stronger sensitivity of outflows to bad past performance than funds with liquid assets. We also find that this pattern disappears in funds where the shareholder base is composed mostly of large investors. We present further evidence that these results are not attributable to alternative explanations based on the informativeness of past performance or on clientele effects. We analyze the implications for funds’ performance and policies.
Runs on Money Market Mutual Funds Schmidt, Lawrence; Timmermann, Allan; Wermers, Russ
The American economic review,
09/2016, Letnik:
106, Številka:
9
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We study daily money market mutual fund flows at the individual share class level during September 2008. This fine granularity of data allows new insights into investor and portfolio holding ...characteristics conducive to run risk in cash-like asset pools. We find that cross-sectional flow data observed during the week of the Lehman failure are consistent with key implications of a simple model of coordination with incomplete information and strategic complementarities. Similar conclusions follow from daily models fitted to capture dynamic interactions between investors with differing levels of sophistication within the same money fund, holding constant the underlying portfolio.
•We investigate how fund family affiliation impacts the liquidity management of U.S. equity funds.•We find that funds within large families use cash and sell their most liquid assets to meet ...redemption demand, while funds within small families maintain their cash balance and their most liquid assets.•We also find that, in large fund families, funds with high (low) total fees tend to consume (preserve) liquidity. In contrast, in small fund families, funds implement similar liquidity strategies regardless their fee charges.•Our results are consistent with the fund family favoritism strategy documented in the mutual fund literature.
The article investigates how fund family affiliation impacts the liquidity management of U.S. equity funds. We find that funds within large families use cash and sell their most liquid assets to meet redemption demand. In contrast, funds within small families maintain their cash balance and their most liquid assets. We also find that, in large fund families, funds with high (low) total fees tend to consume (preserve) liquidity. In contrast, in small fund families, funds implement similar liquidity strategies regardless their fee charges. These results are consistent with the fund family favoritism strategy documented in the mutual fund literature.
Can water mutual funds aid sustainable development? Ibikunle, Gbenga; Martí‐Ballester, Carmen‐Pilar
International journal of finance and economics,
January 2022, 2022-01-00, 20220101, Letnik:
27, Številka:
1
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We conduct the first comparative analysis of the financial performance of global water mutual funds with conventional, ecology and natural resources mutual funds. Based on a unique sample of 88 ...water, 198 ecology, 370 natural resources, and 7,437 conventional mutual funds covering the 2008–2017 period, we contrast the financial performance of these four different fund types. On average, water mutual funds perform comparably to conventional mutual funds and outperform ecology and natural resources funds. The performance dynamics is linked to the state of the economy, such that the outperformance by water mutual funds is not observed when markets are bearish. Overall, fund risk‐adjusted performance is predominantly driven by investor activity, especially with regards to their perception of environmental regulatory risk profiles of funds' constituents.
To understand why investors hold socially responsible mutual funds, we link administrative data to survey responses and behavior in incentivized experiments. We find that both social preferences and ...social signaling explain socially responsible investment (SRI) decisions. Financial motives play less of a role. Socially responsible investors in our sample expect to earn lower returns on SRI funds than on conventional funds and pay higher management fees. This suggests that investors are willing to forgo financial performance in order to invest in accordance with their social preferences.
In this paper, we tackle the issue of evaluating an important class of green investing that integrate classical financial tasks with some environmental issues: the so-called green mutual funds.
In ...order to do this, we first propose three measures of environmental sustainability which may give financial agents information on the greenity of their investments. These alternative indicators could serve as an overall measure of environmental sustainability and overcome the drawback that limits the evaluation of green investments to the measurement of CO2 emissions while often more than one environmental aspects may be considered.
Secondly, we propose some models aimed at evaluating the performance of green mutual funds by taking into account the proposed environmental measures as well as some classical financial indicators. The analysis is carried out in a Data Envelopment Analysis (DEA) framework, since DEA models can consider strategic non-financial objective measures in addition to traditional financial metrics in order to give a more balanced view of socially responsible investments (SRI). The presented models include indicators of environmental sustainability in different ways, either by penalizing a high environmental consumption or by rewarding an environmental saving entailed by a low consumption. The environmental measures and the models proposed are applied to a set of European green funds in the periods 2012–2015 and 2010–2015 to conduct an extensive analysis.
•We propose indicators to measure the environmental saving/consumption of funds.•We evaluate the performance of green mutual funds with a DEA approach.•The DEA models proposed consider both environmental and financial indicators.•An empirical investigation is carried out on European green mutual funds.•A comparison of the performances of green and non-green funds is also conducted.
Passive investors, not passive owners Appel, Ian R.; Gormley, Todd A.; Keim, Donald B.
Journal of financial economics,
07/2016, Letnik:
121, Številka:
1
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Passive institutional investors are an increasingly important component of U.S. stock ownership. To examine whether and by which mechanisms passive investors influence firms' governance, we exploit ...variation in ownership by passive mutual funds associated with stock assignments to the Russell 1000 and 2000 indexes. Our findings suggest that passive mutual funds influence firms' governance choices, resulting in more independent directors, removal of takeover defenses, and more equal voting rights. Passive investors appear to exert influence through their large voting blocs, and consistent with the observed governance differences increasing firm value, passive ownership is associated with improvements in firms’ longer-term performance.
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