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21 – 30 of over 16000The purpose of this paper is to investigate whether mutual fund investors can make effective cash flow timing decisions and examine the sensitivity of these decisions to past fund…
Abstract
Purpose
The purpose of this paper is to investigate whether mutual fund investors can make effective cash flow timing decisions and examine the sensitivity of these decisions to past fund performance using cash flow data at the individual fund level.
Design/methodology/approach
This study examines performance persistence and investor timing ability of 200 domestic equity mutual funds in Taiwan between 1996 and 2009. In particular, a performance gap measuring the difference between dollar‐weighted average monthly returns and geometric average monthly returns is used to evaluate investors' timing ability.
Findings
The empirical results show that funds that have performed well (poorly) in the previous year tend to continue performing well (poorly) in the following year, and investors' timing performance is negatively related to fund performance. The results also show that investors' timing performance is significantly and negatively related to fund size, length of fund history, and momentum‐style of funds, but positively related to value‐style funds. These results suggest that mutual fund investors are loss‐averse and demonstrate return‐chasing behavior in well‐performing funds.
Originality/value
The paper contributes to the mutual fund performance literature by proposing an integrated framework that jointly tests fund performance and how it affects investors' cash flow timing decisions. Furthermore, the paper individually measures investors' timing sensitivity for the current best (worst) performance funds and consecutive two‐year best (worst) performance funds, and contributes to a growing body of research on the behavior of mutual fund investors.
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Ann-Ngoc Nguyen, Muhammad Sadiq Shahid and David Kernohan
The purpose of this paper is to investigate the impact of investor confidence on mutual fund performance in two relatively vulnerable but leading emerging markets, India and…
Abstract
Purpose
The purpose of this paper is to investigate the impact of investor confidence on mutual fund performance in two relatively vulnerable but leading emerging markets, India and Pakistan.
Design/methodology/approach
A pooled ordinary least squared (OLS) model is used to look at two alternative measures of investor confidence and test for the relationship between investor confidence and mutual fund returns. To check the robustness of the findings, the authors also implement two-stage least squares and generalized method of moments techniques to control for unobserved heterogeneity, simultaneity and dynamic endogeneity problems in the regressors.
Findings
The paper finds that the returns of mutual funds are positively associated with investor confidence and an interaction effect exists between investor confidence and persistence in performance. The paper also confirms that returns from mutual funds are associated with different fund characteristics such as fund size, turnover, expense, liquidity, performance persistence and the fund’s age. These findings remain robust to alternative model specifications and measures of investor confidence.
Originality/value
While the previous literature mainly focuses on mutual fund characteristics and the macroeconomic determinants of mutual fund returns, this paper demonstrates that investor confidence plays an important role in determining mutual fund performance. The authors attribute this finding to two relatively unique features of the emerging markets in the study. A lack of awareness of mutual funds as being a low-cost investment vehicle and the interplay of cultural and behavioral changes have prevented investor’s savings from being channeled into investment products, away from gold or property.
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The purpose of this study is to investigate a theoretical framework that examines and extends understanding of the role of cognitive/information processing, learning motivation…
Abstract
Purpose
The purpose of this study is to investigate a theoretical framework that examines and extends understanding of the role of cognitive/information processing, learning motivation and learning task behaviors in facilitating student engagement, course persistence and academic performance.
Design/methodology/approach
Student subjects were used to collect survey data. Hierarchical regression analysis was used to test the impact of active teaching, academic self-efficacy and task avoidance on the dependent variables – course grade, course persistence and expectancy for success.
Findings
Active teaching and academic self-efficacy were positive predictors of course grade while task avoidance was a negative predictor of course grade. Course persistence was positively impacted by academic self-efficacy and diminished by task-avoidance behaviors. Academic self-efficacy was shown to positively impact expectancy for success.
Practical implications
The results confirm the importance of adopting active teaching techniques, the need for periodic opportunities for experienced academic success and the need for coaching on self-regulation of study habits and class attendance behaviors.
Originality/value
This study builds on prior calls for more investigations on the role of teaching style on student psychological responses, engagement, learning task behaviors and academic performance. The teaching and learning processes were examined on four levels – attention/engagement, encoding, processing/synthesizing and learning task behaviors. In addition, prior work was extended by incorporating behavioral indicators (e.g. task avoidance) of learning motivation as opposed to reliance on self-reported levels of motivation that may have not been consistent with actual behaviors.
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The purpose of this paper is to examine the ability of hedge funds and funds of hedge funds to generate absolute returns using fund level data.
Abstract
Purpose
The purpose of this paper is to examine the ability of hedge funds and funds of hedge funds to generate absolute returns using fund level data.
Design/methodology/approach
The absolute return profiles are identified using properties of the empirical distributions of fund returns. The authors use both Bayesian multinomial probit and frequentist multinomial logit regressions to examine the relationship between the return profiles and fund characteristics.
Findings
Some evidence is found that only some hedge funds strategies, but not all of them, demonstrate higher tendency to produce absolute returns. Also identified are some investment provisions and fund characteristics that can influence the chance of generating absolute returns. Finally, no evidence was found for performance persistence in terms of absolute returns for hedge funds but some limited evidence for funds of funds.
Practical implications
This paper is the first attempt to examine the hedge fund return profiles based on the notion of absolute return in great details. Investors and managers of funds of funds can utilize the identification method in this paper to evaluate the performance of their interested hedge funds from a new angle.
Originality/value
Using the properties of the empirical distribution of the hedge fund returns to classify them into different absolute return profiles is the unique contribution of this paper. The application of the multinomial probit and multinomial logit models in the fund performance and fund characteristics literature is also new since the dependent variable in the authors' regressions is multinomial.
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Andreas Oehler, Andreas Höfer, Matthias Horn and Stefan Wendt
Retail investors use information provided by mutual fund rating agencies to make investment decisions. This paper aims to examine whether the ratings provide useful information to…
Abstract
Purpose
Retail investors use information provided by mutual fund rating agencies to make investment decisions. This paper aims to examine whether the ratings provide useful information to retail investors by analyzing the rating migration and closure risk of mutual funds that received Morningstar’s mutual fund ratings from 2005 to 2012.
Design/methodology/approach
The research design differentiates between buy-and-hold investment strategies and dynamic investment strategies. To assess the information content of mutual fund ratings for buy-and-hold investment strategies, the rating migration based on the first and the last mutual fund rating during two-, four-, six- and eight-year horizons is determined. With respect to dynamic investment strategies, the number of rating changes per fund on a monthly basis during these time horizons is calculated.
Findings
Mutual fund rating persistence is low or even inexistent, in particular, during longer time periods. Only for lower-rated funds, the rating appears to indicate higher risk of fund closure. In addition, mutual funds face a large number of up to 38 monthly rating changes in the eight-year window.
Originality/value
Mutual fund rating persistence has hardly been analyzed for funds offered to retail investors so far. This paper clearly points out that because of the extensive rating migration and the high number of monthly rating changes, retail investors barely benefit from using mutual fund ratings.
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This paper aims to focus on the performance of private equity real estate funds. Since many institutional investors have special programs to invest with first time managers, or…
Abstract
Purpose
This paper aims to focus on the performance of private equity real estate funds. Since many institutional investors have special programs to invest with first time managers, or emerging fund managers, it also seeks further evidence on how persistent the performance of real estate funds is and how the growth in fund size affects the realised returns of a fund.
Design/methodology/approach
The analyses performed are based on a large global sample of value‐added and opportunistic private real estate funds. Different model specifications are used to study the fund and sponsor‐related factors' correlation with fund performance.
Findings
It is shown that the realised performance is positively correlated with fund size but negatively correlated with the sequence number of the fund supporting the fact that emerging managers are likelier to achieve good returns. The data also reveal trends in fund performance and the growth of the fund size. Evidence from private equity buy‐out funds has also shown that better performing fund managers are likely to raise follow‐on funds and often larger funds than poorly performing fund managers which is also confirmed by the findings of this paper. There is also an evidence that top‐performing funds do not grow proportionally as much as the average funds.
Research limitations/implications
Actual datasets used in the regression models are often limited by exclusion of immature funds to enhance reliability of results.
Originality/value
This paper expands the recent studies on private equity to private real estate, an area that has experienced substantial growth during the past ten years.
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When one talks of the return performance one typically refers to an average buy‐and‐hold return, also known as time‐weighted return. However, the returns of investors can be quite…
Abstract
Purpose
When one talks of the return performance one typically refers to an average buy‐and‐hold return, also known as time‐weighted return. However, the returns of investors can be quite different. Investor returns are determined not only by the returns on the underlying assets but also by the timing and magnitude of their capital flows into and out of these assets. To account for the annual‐to‐annual variation in assets under management, a dollar‐weighted return has to be calculated. The difference between time‐weighted returns and dollar‐weighted returns is known as the performance gap. The purpose of this paper will be to investigate this in the UK property market.
Design/methodology/approach
Using an approach similar to that of Dichev the authors examine the performance gap in the UK direct property market using historical return data for 45 market‐segments over the time period 1981‐2009.
Findings
The results show that the performance gap was negative, i.e. investor returns were greater than asset returns. That is, UK direct property investors have shown greater returns than their underlying investments. This implies that estimates of the performance of the UK property market based on property returns do not reflect the experience of investors as a group.
Originality/value
This study provides the first evidence of the performance gap in the UK direct real estate market.
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Priya Malhotra and Pankaj Sinha
Mutual funds are the second most preferred investment option in India and have garnered considerable research interest. The focus of Indian studies thus far has been restricted to…
Abstract
Purpose
Mutual funds are the second most preferred investment option in India and have garnered considerable research interest. The focus of Indian studies thus far has been restricted to the bottom-up approach of investing which rewards a fund manager for picking winner stocks and generates superior returns. While changing portfolio allocation as per varying macro-trends has been instrumental in generating superior returns, it has not been given the desired attention. This study addresses this important research gap.
Design/methodology/approach
The authors analyze the industry selection ability of the fund manager on a robust sample by decomposing alpha into alpha due to industry selection and alpha attributable to stock selection. Alpha estimates are computed on a robust sample of 34 open-ended Indian equity mutual funds for a 10-year duration 2011–2020 using three base models of asset pricing – single-factor, four-factor and five-factor alpha under panel data methodology.
Findings
The study leads us to four major findings. One, industry selection explains more than two-fifth of the alpha both in cross-section and time series of returns; two, industry selection exhibits persistence for more than four quarters across asset pricing model; third, younger funds have level playing when alpha from picking right industries is concerned; four, broad industry allocation continues to explain superior returns as sector allocation undergoes consolidation during ongoing COVID-19 pandemic and funds increase exposure to defensive stocks, consistent with folio allocations as per macroeconomic conditions.
Research limitations/implications
The authors find strong evidence of persistence in the case of alpha attributable to the industry selection component, and the findings are consistent with the persistence results reported in the empirical literature. While some funds excel in stock-picking skills and others excel in picking the right industries, both skills together make for winner funds that attract larger investor flows as investors chase superior performance. The authors also find no evidence of diseconomies of scale in the case of industry allocation alpha generated by the fund managers.
Practical implications
The results suggest a fresh approach for investors while making mutual fund investment decisions; the investors can achieve superior returns by assessing industry selection skills as it tends to provide a more holistic picture concerning a perennial question – why some funds outperform and continue to contribute to investor's wealth?
Social implications
Mutual funds have become a favored investment option for Indian investors more so as a disciplined investment option owing to dismal financial literacy rates. The study throws light on a relatively unaddressed dimension of choosing winner funds. The significance of right sector allocation assumed even more significance with the onset of the pandemic which lends further credence to the findings of the study.
Originality/value
Research has been conducted on secondary data extracted from a well-cited database for Indian mutual funds. Empirical analysis and conclusion drawn are based on authentic statistical analysis and adds to the existing literature.
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Jerayr Haleblian and Nandini Rajagopalan
In our framework, we examine the influence of both reactive and proactive cognitive variables on strategic change. Reactive sources that impact strategic change are perceptions…
Abstract
In our framework, we examine the influence of both reactive and proactive cognitive variables on strategic change. Reactive sources that impact strategic change are perceptions and attributions – cognitions that determine the “what” and the “why” of performance. Perceptions are first-order cognitions that assess what is the performance feedback: positive or negative? After performance feedback is perceived, attributions are second-order cognitions that attempt to establish why the performance is positive or negative.
Ofer Arbaa and Eva Varon
The purpose of this paper is to study the sensitivity of provident fund investors to past performance and how market conditions, changes in risk and liquidity levels influence the…
Abstract
Purpose
The purpose of this paper is to study the sensitivity of provident fund investors to past performance and how market conditions, changes in risk and liquidity levels influence the net flows into provident funds by using a unique sample from Israel.
Design/methodology/approach
The study checks the impact of different levels of fund performance on provident fund flows using three alternative proxies for performance: raw return and the risk adjusted returns based on the Sharpe ratio and the Jensen’s α. The analysis relies on the time fixed effect and fund fixed effect regression models.
Findings
Results reveal that there exists an approximately concave flow–performance relationship and performance persistence among Israeli provident funds. Israeli provident fund investors are risk averse so they overreact to bad performance both in bull and bear markets. Moreover, liquidity is an important factor to influence the flow–performance curve. The investors’ strong negative response to poor performance and relative insensitivity to outperformance show that provident fund managers are not rewarded for their risk-shifting activities as in mutual funds.
Originality/value
The authors explore the behavior of investor flows in non-institutional retirement savings funds specifically outside of the USA, which is a topic not properly investigated in literature. Moreover, examining inflows and outflows separately gives the authors a richer understanding of investors in pension schemes. This study also enhances the understanding of the impact of fund liquidity on the flow–performance relationship for the retirement funds segment.
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