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Full-Text Articles in Finance and Financial Management
The Why And How Of Mutual Fund Standard Deviations, Ladd Kochman, Randy Goodwin
The Why And How Of Mutual Fund Standard Deviations, Ladd Kochman, Randy Goodwin
Ladd Kochman
To the interested observer, mutual fund standard deviations raise two tantalizing questions: Are standard deviations relevant when funds, by definition, eliminate the unsystematic component of total risk? and How can two respected giants in the investments field like Fidelity and Morningstar use the same returns, intervals and measurement period for the same fund and end up with glaringly different standard deviations? To answer the question of relevance, we recall Evans and Archer's (1968) argument that as much as 90 percent of a portfolio's unsystematic risk can be diversified away with 12 to 18 stocks. Since that diversifiable risk is a …
Do Mutual Funds Herd In Industries?, Umut Celiker, Jaideep Chowdhury, Sokhan Sonaer
Do Mutual Funds Herd In Industries?, Umut Celiker, Jaideep Chowdhury, Sokhan Sonaer
Business Faculty Publications
This study examines whether mutual funds herd in industries and the extent to which such herding impacts industry valuations. Using two herding measures proposed by Lakonishok et al. (1992) and Sias (2004) we document that mutual funds herd in industries. We show that industry herding is not driven by fund flows and that it is not a manifestation of individual stock herding. We also find evidence indicating that herding in industries by mutual funds is related to the industry momentum phenomenon first documented by Moskowitz and Grinblatt (1999), but it does not drive industry valuations away from their fundamentals.