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The purpose of this paper is to investigate if there is any impact of reporting delays on profitability of front-running strategies against the mutual funds.

The author studies if freshness of mutual fund holding information from public disclosures affects precision of flow-based front-running strategies against the funds and if the allowed 60-day reporting delay is able to protect the funds from these front-running activities against them.

Assuming no reporting delay, the author finds that returns from hypothetical front-running strategies are significant, when these are based on the most recent holding information and are not significant, when based on relatively old holding information. Interestingly, these front-running returns appear to be mostly driven by anticipated forced buys by the mutual funds (rather than anticipated forced sales). The return from a front-running strategy long on anticipated forced buys is higher when it is based on relatively illiquid assets. The author also finds that return from a front-running strategy short on anticipated forced sales is significant, when it is based on illiquid assets from relatively old holding information.

Hence, it appears that the allowed 60-day reporting delay is able to protect most of the funds from front-running activities against them, except for the funds holding illiquid assets from anticipated forced sales motivated front-running activities against them.

The paper addresses an interesting question, which has not been studied before – if freshness of fund holding information helps the front-running strategies against the funds and if the allowed reporting delay is effective in protecting the funds from these activities.

This paper aims to assess the ability of New Zealand (NZ) actively managed funds to generate risk-adjusted outperformance using portfolio holdings data. Focusing on domestic equity allocations addresses the benchmark selection issue, particularly for funds with national and international exposures.

The authors assess performance using several asset pricing models including the CAPM, three-factor and four-factor models. The authors also assess performance across funds with different characteristics such as fund size, size of local holdings, type of fund provider, past returns and fees. The authors further examine whether funds engage in any stock-picking or market timing by considering the active share and tracking error.

The returns on NZ equity holdings of NZ actively managed funds from 2010 to 2017 provide little evidence of risk-adjusted outperformance and stock-picking skill. These exposures yield pre-cost returns that have a nearly perfect correlation with the market index and an insignificant alpha. Funds show little tendency to bet on any of the main characteristics known to predict stock returns, such as size, book-to-market and momentum. In addition, the authors show that the average active shares and tracking errors are low, suggesting that the majority of funds hold NZ equity portfolios that closely mimic the market index.

Existing studies rely on returns data which aggregate performance across all asset classes with varying exposures. This may lead to benchmark selection issues (particularly for funds with international exposures) which may obscure the fund manager’s true stock-picking skills. Assessment using holdings data would enable suitable performance measurement by researchers and industry analysts.

The purpose of this paper is to examine the relationship of CEO compensation plans and the risk of managerial equity portfolios with the extent of strategic investments in advertising, capital expenditures and research and development (R&D). The elements of compensation are salary, bonuses, options and restricted stock grants. The authors proxy the design of CEO equity portfolios by the price performance sensitivity of the holdings and the portfolio deltas.

The authors use the components of executive compensation and portfolio risk as the dependent variables, regressing these against measures for the level of strategic investment. The authors test for non-linear relationships between the components of CEO compensation and strategic investments. The sample is a broad cross-section from 1992 to 2016.

The authors find strong support for non-linear relationships of capital expenditures and R&D with CEO bonuses, option grants and restricted stock grants. There are very complex relationships between the components of executive compensation and R&D expenditures, but little evidence of a relationship with advertising expenditures. The authors also find strong complex relationships in the design of CEO equity portfolios with advertising and R&D.

Little earlier research has considered advertising, capital expenditures and R&D in a unified framework. Also, testing for non-linear associations provides much greater insight into the relationship between the components of executive compensation and strategic investment. The findings represent a valuable incremental contribution to the executive compensation literature. The results also have normative policy implications for compensation committees’ design of optimal annual CEO compensation packages to incentivize or discourage particular strategic investment behavior.

Congress and the Securities and Exchange Commission (SEC) have mandated mutual fund disclosure regimes to help investors make better investment decisions to strike an optimal balance between the investors' interest in more timely and accurate portfolio holdings disclosure and the cost associated with making and disclosing the holdings information available to investors. Many academics and practitioners point out that, despite all the regulations on portfolio disclosure, fund managers can still engage in practices that go against the spirit of the rules without violating the letter of the law. The purpose of this paper is to address the empirical question of whether the practice exists, using holdings data for more than 3,000 equity mutual funds during the time period from 1995 to 2004.

In this paper, the authors examine window dressing by mutual fund portfolio managers, using holdings data covering more than 3,000 equity mutual funds from 1995 to 2004. The authors first investigate whether the fund holdings are materially different from universe holdings across performance quintiles based on holdings in the month of disclosure and in the following month. The second part of the analysis examines funds' patterns of buying and selling. Finally, the measure of “Buying Intensity” and “Selling Intensity” is examined, with a specific focus on the holdings data for the fourth quarter.

An examination of fund holdings finds no statistically significant evidence of systematic window dressing, either at the aggregate level or within subsamples of funds based on size or past performance. Rather, it was found that fund managers tend to chase momentum. A combination of investor sophistication and market oversight may serve to be effective in dissuading fund managers from engaging in the practice.

The authors' data are at the individual fund level, based on equity mutual funds holdings data provided to Morningstar on a quarterly or monthly basis (according to Elton et al., the Morningstar database provides timely and accurate mutual fund holdings information). These data allow us to infer better the investment manager intent vis‐à‐vis using 13F data, which is aggregate data across various fund families and separate accounts, or aggregate pension fund equity holdings data that includes aggregate holdings of multiple portfolio managers. In addition, the authors comment on the significance of the regulatory checks and balances that are designed to restrict fund managers' ability to window‐dress their portfolios. In summary, the combination of quantitative evidence from empirical tests and an examination of the legal framework under which mutual fund portfolio managers operate, lead to the conclusion that window dressing is not prevalent in the industry.

This paper aims to investigate the influence of social interactions on mutual fund portfolios from the perspective of alumni network in China.

Based on a data set that consists of 162 actively managed equity funds in China during the time period of 2003–2014, this study employs multiple linear regression model to control for organization- and location-based interpersonal connections as well as other confounding factors and clarify the causality relationship between alumni networks of mutual fund managers and their portfolios.

After controlling for organization- and location-based interpersonal connections, we find that mutual fund managers who graduated from the same college/university have more similar stock holdings and are more likely to buy or sell the same stocks contemporaneously. As a result, alumni managers exhibit a higher correlation of fund returns. Moreover, the effect of alumni relationship on mutual fund investments becomes weaker when more managers are connected within the network. We also find that valuable information is shared among alumni managers: (1) the average returns for the alumni common holdings portfolios is significantly higher than those for non-alumni holdings portfolios and (2) a long-short strategy composed of stocks purchased minus sold by alumni managers yields positive and significant risk-adjusted returns.

The findings suggest that information dissemination among connected fund managers could be one of the driving forces for mutual fund herding behavior, and that a portfolio of funds whose managers are educationally connected could be highly exposed to certain stocks and risks.

This paper contributes to the growing finance literature addressing the influence of personal connections on information dissemination that specifically contributes to price formation. It corresponds more closely to Cohen et al. (2008), who investigate college alumni connections between fund managers and corporate board members. Since the authors simultaneously examine three potentially overlapped social networks, which are based on education, locality and fund family, the authors are able to disentangle their effects on fund managers' investment decisions. Moreover, the findings suggest that institutional investors make investment decisions based on share private information, and therefore, it also contributes to the literature on fund herding behaviors (Grinblatt et al., 1995; Wermers, 1999).

This study aims to assess the relationship between cash management and fund performance in index fund portfolios.

Using a sample of 104 index mutual funds that track the Standard and Poor 500 stock market index from January 1999 to December 2016, the authors employ quintile portfolios and different regression models to assess the differences in risk-adjusted monthly returns experienced by index funds managing different cash levels in their portfolios. To ensure the robustness of the results, different sub-periods and market states are considered in the analyses as well as other exogenous factors and fund characteristics affecting the level of portfolio cash holdings and index fund performance.

Results show that index funds holding higher levels of cash and cash equivalents performed significantly worse than their low-cash counterparts. This evidence remains even after considering different sub-periods and bullish and bearish market conditions and controlling for fund expenses and other variables that could drive this cash-performance relationship.

This study expands the extant literature analyzing cash management in the mutual fund industry. More specifically, the analyses focus on index fund portfolios that replicate a specific benchmark, given that their performance differences should not be related to the market evolution but to the factors derived from the fund management and other exogenous issues. These findings are of interest to managers and investors willing to improve their risk-adjusted returns while investing as diversified as a stock market index.

El objetivo de este estudio es analizar la relación existente entre la gestión de efectivo y el desempeño consiguiente en las carteras de fondos de inversión indexados.

Utilizando una muestra de 104 fondos que replican el índice bursátil Standard and Poor's 500 desde enero de 1999 hasta diciembre de 2016, se emplean carteras hipotéticas que invierten en fondos similares y diferentes análisis de regresión para analizar las diferencias en las rentabilidades ajustadas mensuales entre fondos indexados que gestionan diferentes niveles de efectivo en sus carteras. Por motivos de robustez, se tienen en cuenta diversos subperiodos y estados de mercado, así como otros factores exógenos y características de los fondos que afectan tanto al nivel de efectivo mantenido en la cartera indexada como al desempeño de la misma.

Los resultados muestran que los fondos indexados que gestionan niveles de efectivo más elevados experimentan un desempeño significativamente menor que otros fondos comparables que mantienen menores porcentajes de efectivo en sus carteras de inversión. Se obtiene una evidencia similar tras considerar diferentes subperiodos y momentos alcistas y bajistas de mercado, así como al considerar los gastos propios de cada fondo y otras variables que podrían afectar esta relación entre el rendimiento y el efectivo gestionado.

Este estudio contribuye a la literatura existente que analiza la gestión de efectivo en la industria de fondos de inversión. Más específicamente, los análisis se centran en carteras de fondos que replican un índice bursátil específico, dado que las diferencias en sus rendimientos en este tipo de fondos no deberían originarse por la evolución del mercado, sino a causa de factores relacionados con la gestión de sus carteras y otros componentes exógenos al índice bursátil. Estos hallazgos son de interés para gestores e inversores que pretendan mejorar sus rentabilidades ajustadas al invertir mediante una estrategia tan diversificada como un índice bursátil.

Analyses the diversification effects of the portfolio holdings of ten selected listed property investment companies on the co‐movement of the stock prices for an 11‐year period from 1983 to 1994. The long‐term common trends in the sample securitized property companies are tested using the bivariate and the Johansen’s multivariate cointegration methodologies. The empirical evidence does not reject the hypothesis that prediction of the price variation of one stock based on the change in the price of another comparable stock is possible in the long term. Also, the price convergence process was not dependent on whether two companies are practising the same diversification and/or specialisation policies. However, there is evidence that companies with large portfolio holdings can influence the stock prices of property companies with smaller portfolio holdings. This implies that arbitraging the small stocks by reading the price movement of the large firms could give possible abnormal returns to the investor.

We form portfolios based on return and liquidity and examine the effects of liquidity and other risk factors on asset pricing in the Chinese stock market. Our results show that the past loser-and-illiquid stock portfolios tend to outperform the past winner-and-liquid stock portfolios in the 1–12 months holding period. The excess return is significantly associated with the market-wide liquidity factor even when we control the three Fama-French and momentum factors. Cross-sectionally, the liquidity beta significantly affects the excess return even with control of other risk betas and other traditional liquidity proxies.

We assess whether smaller investors are more likely to hold shares of closed-end funds that invest more heavily in illiquid securities. We also examine the relationship between the liquidity of the securities held in the portfolios of closed-end mutual funds (portfolio liquidity) and the liquidity of the closed-end funds’ shares (fund-share liquidity). Using a sample of 1,619 fund-years from 2010 to 2012, we find that smaller investors are more likely than institutional investors to own closed-end funds. We also find that the liquidity of closed-end funds’ portfolios is positively associated with the liquidity of the funds’ shares. Our findings are consistent with the “liquidity benefits” notion that closed-end funds are a means for smaller investors to invest in less liquid securities. In addition, our findings are consistent with the “valuation skepticism” notion which indicates that, due to the difficulty of objectively valuing illiquid securities, different perceptions of the value of illiquid securities held in funds’ portfolios may result in greater fund-share liquidity.

The paper aims to conduct an empirical study of three models of property derivatives: index-based derivatives, factor hedges, and combinative hedges based on index and factors. The objective is to test whether the latter two models introduced by Lecomte dominate the index-based model used for existing property derivatives such as EUREX futures contracts.

Based on investment property database (IPD) historical database covering 224 individual office properties from 1981 to 2007, the study assesses ex ante hedging effectiveness of the three models. Nine simulations are run under different hypotheses involving individual buildings and portfolios. The 17 factors included in the study cover both macro-factors (e.g. macroeconomic indicators) and micro-factors linked to the properties (e.g. age).

Atomization and periodic rebalancing of property derivatives' underlying make it possible to substantially increase hedging effectiveness for a large majority of buildings in the sample. However, combinative hedges are overall superior to factor hedges owing to the overriding role played by IPD indices in capturing risk.

Due to confidentiality requirements inherent to the use of property level data, the study downplays the role of micro-factors on real estate risk at the property level.

The paper introduces a typology of optimal hedges aimed at individual property owners and portfolio holders in the City office property market.

This is the first time a comprehensive analysis of different models of property derivatives is conducted. The value of the paper stems from the use of property level data.