We empirically investigate the effect of the centrality of mutual funds (MFs) on the holding network of each listed firm in cross-province acquisitions in China using a unique dataset covering the ...2010-2019 period. We find a positive association between the centrality of MFs and the likelihood and value of cross-province acquisitions made by the listed firm, especially when the central blockholder MF pays corporate site visits, when target firms are difficult for the acquirer to reach, and when the central blockholder MF is low-risk or high-performance. We also show that blockholder centrality improves the market valuation and post-acquisition performance of cross-province acquisitions. These results support the notion that a MF with the largest blockholder centrality increases the value of the listed firms it owns by alleviating information asymmetry in cross-province acquisitions. Collectively, our evidence highlights the advisory role of a blockholder network for listed firms.
The literature is rich with examples of price clustering in financial markets. This study focuses on the relation between mutual fund ownership (both active and passive) and stock price clustering. ...To the extent that mutual funds are sophisticated investors, we posit that their trades are associated with lower levels of price clustering. We find support for this hypothesis as total, active, and passive mutual fund ownership are negatively related to the degree of price clustering. Surprisingly, price clustering’s association to passive (e.g. index) mutual fund ownership is an order of magnitude greater than to active ownership.
In this study, we provide a comprehensive examination of the performance of financial (specialty sector financial) mutual funds over a 23-year period, a much longer time frame than what has been ...analyzed in previous literature. To fully understand the performance of these mutual funds, we consider multiple factors, including risk-adjusted performance, both unconditional and conditional multifactor analysis, and market timing and selectivity. Financial mutual funds have higher risk-adjusted performance than the overall market and financial sector benchmarks. However, fund alphas are not different from zero, and managers do not exhibit market timing or security selection abilities. Our analysis not only includes the overall performance of these mutual funds, but we also delve into sub-samples before and after the 2008 financial crisis and during the recent Coronavirus pandemic.
Highly accurate traffic flow prediction is essential for effectively managing traffic congestion, providing real-time travel advice, and reducing travel costs. However, traditional traffic flow ...prediction models often fail to fully consider the correlation and periodicity among traffic state data and rely on static network topology graphs. To solve this problem, this paper proposes a expressway traffic flow prediction model based on multi-feature spatial-temporal adaptive periodic fused graph convolutional network (MFSTAPFGCN). First, we make fine preprocessing of the raw data to construct a complete and accurate dataset. Second, by deeply investigating the correlation properties among section speed, traffic flow, and section saturation rate, we incorporate these features into a multi-feature temporal attention mechanism in order to dynamically model the correlation of traffic flow in different time periods. Next, we adopt a spatial-temporal adaptive fusion graph convolutional network to capture the daily cycle similarity and potential spatial-temporal dependence of traffic flow data. Finally, the superiority of the proposed MFSTAPFGCN model over the traditional baseline model is verified through comparative experiments on real Electronic Toll Collection (ETC) gantry transaction data, and the effectiveness of each module is demonstrated through ablation experiments.
We investigated the relationship between a mutual fund's variation in factor
exposures and its future performance. Using a dynamic state-space version of the
Carhart (1997) four-factor model to ...capture factor variations, we found that funds
with volatile factor exposures underperform funds with stable factor exposures by
147 bps a year. This underperformance is explained neither by volatile factor
loadings of a fund's equity holdings nor by a fund's forced trading
through investor flows. We conclude that fund managers voluntarily attempt to time
factors but are unsuccessful at doing so.
Disclosure: The authors report no conflicts of interest.
Editor's Note
Submitted 13 February 2020
Accepted 5 August 2020 by Stephen J. Brown
We propose a model of delegated asset management that can explain the following empirical regularities in international markets: the presence of home bias, the lower proportion of mutual funds ...investing domestically, and the higher market value of mutual funds investing domestically. In the model, fund managers choose whether to specialize in domestic or foreign assets. Individual investors are uncertain about managers' abilities, and they are more informed about domestic markets. This makes domestic investments less risky and generates home bias. Home bias is magnified because higher-ability managers specialize in domestic assets, making them even more attractive to the investors.
The performance of portfolio managers depends on market timing, volatility timing, and security selection. We develop holdings-based performance measures that adjust for risk using stochastic ...discount factors, display all three components in a consistent framework, and avoid strong assumptions about managers’ behavior. Previous models leave out some of the components of performance, and correcting for this we deliver better measures of selectivity. Sorting stocks held by funds on selectivity produces a quintile spread in four-factor alphas greater than 2.5% per year before costs and more than 1.7% greater than found using the Daniel, Grinblatt, Titman, and Wermers (1997) measure.
Investor sophistication has lagged behind the growing complexity of retail financial markets. To explore this, we develop a dynamic model to study the interaction between obfuscation and investor ...sophistication in mutual fund markets. Taking into account different learning mechanisms within the investor population, we characterize the optimal timing of obfuscation for financial institutions who offer retail products. We show that educational initiatives that are directed to facilitate learning by investors may induce providers to increase wasteful obfuscation, further disorienting investors and decreasing overall welfare. Obfuscation decreases with competition among firms, since the information rents from obfuscation dissipate as each institution attracts a smaller market share.
A central and contentious debate in many literatures concerns the relationship between financial and social performance. We advance this debate by measuring the financial--social performance link ...within mutual funds that practice socially responsible investing (SRI). SRI fund managers have an array of social screening strategies from which to choose. Prior studies have not addressed this heterogeneity within SRI funds. Combining modern portfolio and stakeholder theories, we hypothesize that the financial loss borne by an SRI fund due to poor diversification is offset as social screening intensifies because better-managed and more stable firms are selected into its portfolio. We find support for this hypothesis through an empirical test on a panel of 61 SRI funds from 1972 to 2000. The results show that as the number of social screens used by an SRI fund increases, financial returns decline at first, but then rebound as the number of screens reaches a maximum. That is, we find a curvilinear relationship, suggesting that two long-competing viewpoints may be complementary. Furthermore, we find that financial performance varies with the types of social screens used. Community relations screening increased financial performance, but environmental and labor relations screening decreased financial performance. Based on our results, we suggest that literatures addressing the link between financial and social performance move toward in-depth examination of the merits of different social screening strategies, and away from the continuing debate on the financial merits of either being socially responsible or not.
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