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Articles 1 - 6 of 6
Full-Text Articles in Finance and Financial Management
Air Pollution, Behavioral Bias, And The Disposition Effect In China, Jennifer (Jie) Li, Massimo Massa, Hong Zhang, Jian Zhang
Air Pollution, Behavioral Bias, And The Disposition Effect In China, Jennifer (Jie) Li, Massimo Massa, Hong Zhang, Jian Zhang
Research Collection Lee Kong Chian School Of Business
Inspired by the recent health science findings that air pollution affects mental health and cognition, we examine whether air pollution can intensify the cognitive bias observed in the financial markets. Based on a proprietary data set obtained from a large Chinese mutual fund family consisting of complete trading information for more than 773,198 ac-counts in 247 cities, we find that air pollution significantly increases investors' disposition effects. Analysis based on two plausible exogenous variations in air quality (the vast dissi-pation of air pollution caused by strong winds and the Huai River policy) supports a causal interpretation. Mood regulation provides a …
Mutual Fund Trading Costs And Diseconomies Of Scale, Jeffrey Busse, Tarun Chordia, Lei Jiang, Yuehua Tang
Mutual Fund Trading Costs And Diseconomies Of Scale, Jeffrey Busse, Tarun Chordia, Lei Jiang, Yuehua Tang
Research Collection Lee Kong Chian School Of Business
Larger mutual funds underperform smaller funds even though they have lower percentage transaction costs. Larger funds hold and trade a larger fraction of bigger, more liquid stocks, which leads to lower percentage transaction costs than smaller funds. Smaller funds outperform larger funds primarily when small cap stocks outperform large cap stocks. Overall, we find that it is not trading costs but fund holding characteristics, especially the market capitalization of stock holdings, that drive diseconomies of scale in the mutual fund industry.
Portfolio Manager Compensation And Mutual Fund Performance, Linlin Ma, Yuehua Tang, Juan-Pedro Gomez
Portfolio Manager Compensation And Mutual Fund Performance, Linlin Ma, Yuehua Tang, Juan-Pedro Gomez
Research Collection Lee Kong Chian School Of Business
We use a novel dataset to study the relation between individual portfolio manager compensation and mutual fund performance. Managers with explicit performance-based pay exhibit superior subsequent fund performance, especially when investment advisors link pay to performance over a longer time period. In contrast, alternative compensation arrangements, such as fixed salary, assets-based pay, or advisor-profits-based pay are not associated with superior performance. Our tests further show that the positive relation between performance-based contracts and fund performance is not driven by the selection of talented managers proxied by education background. Lastly, managers with performance-based pay engage less in risk-shifting activities.
Mutual Fund Industry Selection And Persistence, Jeffrey A. Busse, Qing Tong
Mutual Fund Industry Selection And Persistence, Jeffrey A. Busse, Qing Tong
Research Collection Lee Kong Chian School Of Business
We analyze mutual fund industry selectivity — the performance of a fund’s industry allocation relative to the market. We find that industry selection accounts for a full third of fund performance based on two-digit SIC codes, with the remaining attributable to the performance of individual stocks relative to their own industries. We find that industry-selection skill drives persistence in relative performance, particularly over longer investment horizons. Unlike individual-stock-selection ability, industry selectivity is not eroded by increasing fund assets. Our results suggest that accounting for a manager’s ability to pick outperforming industries provides information beyond standard performance measures that can enhance …
Style Effects In The Cross-Section Of Stock Returns, Melvyn Teo, Sung-Jun Woo
Style Effects In The Cross-Section Of Stock Returns, Melvyn Teo, Sung-Jun Woo
Research Collection Lee Kong Chian School Of Business
Using CRSP stock and mutual fund data, we find strong evidence for reversals at the style level (e.g., large value, small growth, etc.). There are significant excess and risk-adjusted returns for stocks in styles characterized by the worst past returns and net inflows. We also find evidence for momentum and positive feedback trading at the style level. These value and momentum effects are driven neither by fundamental risk nor by stock-level reversals and momentum. Taken together, the results are consistent with the style-level positive feedback trading model of Barberis and Shleifer (2003).
Persistence In Style-Adjusted Mutual Fund Returns, Melvyn Teo, Sung-Jun Woo
Persistence In Style-Adjusted Mutual Fund Returns, Melvyn Teo, Sung-Jun Woo
Research Collection Lee Kong Chian School Of Business
The literature on mutual fund persistence took a hit with the finding that one-year stock momentum and expense ratios account for most of the persistence in mutual fund performance (Carhart, 1992; Carhart, 1997). However, since equity mutual funds are grouped into styles (e.g., large value, small growth, mid-cap growth, etc.) and are often confined to trading stocks within their style, one should measure fund performance relative to style when investigating managerial ability. Using CRSP mutual fund data and a methodology similar to Carhart (1997), we find that differences in style-adjusted fund returns persist for up to six years. Neither one-year …