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Full-Text Articles in Social and Behavioral Sciences
Time-Varying Incentives In The Mutual Fund Industry, Jacques Olivier, Anthony S. Tay
Time-Varying Incentives In The Mutual Fund Industry, Jacques Olivier, Anthony S. Tay
Research Collection School Of Economics
This paper re-examines the incentives of mutual fund managers arising from investor flows. We provide evidence that the convexity of the flow-performance relationship varies with economic activity. We show that the effect is economically large and is not driven by abnormal years. We test two possible channels through which this pattern may arise. We investigate implications of the timevarying convexity for the incentives of managers to alter strategically the risk of their portfolios. We provide evidence that poor mid-year performers increase the risk of the portfolio only when economic activity is strong. Finally, we briefly discuss some methodological implications.
Flow-Performance Relationship And Tournament Behavior In The Mutual Fund Industry, Baoling Ma
Flow-Performance Relationship And Tournament Behavior In The Mutual Fund Industry, Baoling Ma
Dissertations and Theses Collection (Open Access)
In this paper, we interpret the flow-performance relationship as an incentive scheme implicitly given to mutual fund managers by mutual fund investors. We show that the flow-performance relationship varies not only with economic activity but also across fund attributes. We provide evidence that the degree of convexity of the flow-performance relationship has a positive effect on the magnitude of tournament behavior. Different from the conventional tournament hypothesis, we show that although the convexity of the flow-performance relationship does produce implicit incentives for fund managers to modify risk-taking behavior as a function of their prior performance, whether or not the mid-year …