Difference in interim performance and risk taking with short-sale constraints

Absent much theory, empirical works often rely on the following informal reasoning when looking for evidence of a mutual fund tournament: If there is a tournament, interim winners have incentives to decrease their portfolio volatility as they attempt to protect their lead, while interim losers are expected to increase their volatility so as to catch up with winners. We consider a rational model of a mutual fund tournament in the presence of short-sale constraints and find the opposite: Interim winners choose more volatile portfolios in equilibrium than interim losers. Several empirical works present evidence consistent with our model. However, based on the above informal argument, they appear to conclude against the tournament behavior. We argue that this conclusion is unwarranted. We also demonstrate that tournament incentives lead to differences in interim performance for otherwise identical managers and that mid-year trading volume is inversely related to mid-year stock return.     

略论渔业互助保险制度的建构

进行渔村建设为渔民提供完善的渔业保险是社会主义新农村建设在渔区的重要内容。在分析我国目前渔业保险模式的基础上,重点分析了渔业互助保险模式的基础性地位及存在的困境及原因,提出了建构我国渔业互助保险的可行性建议。     

Nash equilibrium without mutual knowledge of rationality

Summary. In a Nash equilibrium, players' rationality is mutual knowledge. However, both intuition and experimental evidence suggest that players do not know for sure the rationality of opponents. This paper proposes a new equilibrium concept, cautious equilibrium, that generalizes Nash equilibrium in terms of preferences in two person strategic games. In a cautious equilibrium, players do not necessarily know the rationality of opponents, but they view rationality as infinitely more likely than irrationality. For suitable models of preference, cautious equilibrium predicts that a player might take a “cautious” strategy that is not a best response in any Nash equilibrium. Received: January 28, 1998; revised version October 2, 1998     

Smart money or dumb money? A study on the selection ability of mutual fund investors in China

We examine investors’ mutual fund selection ability in China. Using actively managed equity mutual funds between 2005 and 2011, we find that Chinese investors generally have no mutual fund selection ability, a result contrary to the smart money effect in the United States. We show that mutual funds that receive more new money subsequently underperform significantly. The findings are robust to several risk-adjusted performance measures. The unique data of China provide separate accounts of institutional and individual investors’ new money flowing into and out of mutual funds, allowing us to examine the mutual fund selection ability of institutional and individual investors. We document that institutional investors exhibit a smart money effect, that is, they are able to move new money into (out of) future good (poor) performers. In contrast, individual investors exhibit a dumb money effect. Our results provide useful information for regulators to review their rules, especially for the protection of individual investors regarding mutual fund investing in China. In addition, we show that it is useful to distinguish institutional and individual investors in mutual fund research.     

On the use of options by mutual funds: Do they know what they are doing?

Given recent regulatory inquiries into the derivative-trading practices of mutual funds, we examine their detailed option holdings to assess how mutual funds employ options, what funds use options, and how that affects performance and risk. Mutual funds’ use of options appears consistent with income generation and hedging motives, is systematically related to experience, education, and gender characteristics of portfolio managers, and does not lead to performance benefits, on average. Instead, certain uses of options lead to underperformance. We document no permanent or temporary aggressive risk taking by options users, finding instead that some funds use options to effectively lower risk.     

The impact of the Arab Spring and the Ebola outbreak on African equity mutual fund investor decisions

Financial development and stock markets have been widely considered to be key factors in economic growth. Among institutional investors, mutual funds play a key role in providing financial resources to stock markets, particularly in developing countries. Different from other investments, mutual fund flows could be affected by retail investors’ behavior and their overreaction to specific events. We considered 78 equity mutual funds that are geographically specialized in African countries and observed monthly flows and performance for the period of 2006–2015. We find that two major events, Ebola and the Arab Spring, significantly affected the fund flows, controlling for fund performance, expenses and market returns. Retail investors over-reacted to these major events, withdrawing their savings from the African mutual funds. This result is particularly strong when connected to the media coverage of these events: the higher the number of articles about Arab Spring and Ebola, the higher the withdrawals. These irrational investors’ behavior damaged the funds’ managers market timing ability, and reduced the equity capital injection into African stock markets. Our results have several implications for both holders of frontier market mutual funds and the overall asset management industry.     

粤港澳大湾区城际铁路公交化运营模式探讨

随着产业、就业、经济、资源的深度融合,粤港澳大湾区各城市呈现出“一座城”的发展态势,区域内城际铁路快速发展。通过对粤港澳大湾区城际铁路客流特征进行分析,梳理目前大湾区城际铁路运营模式,进一步设计大湾区城际铁路公交化运营模式,并挖掘传统铁路运营模式中阻碍城际旅客便捷化出行的关键环节,提出大湾区城际铁路公交化运营发展对策,为粤港澳大湾区城际铁路公交化运营组织提供设计参考,以更好地促进区域交通一体化,服务于城际间区域联动发展。     

Endogeneity in the mutual fund flow–performance relationship: An instrumental variables solution

We use an instrumental variables (IV) approach to examine the effects of dynamic endogeneity when estimating the relationship between mutual fund flows and performance. Unlike the one-stage estimation approach commonly used in prior research, the IV approach allows us to address reverse causality between flow and performance. Through rigorous exclusion tests, we conclude that fund media coverage, risk ranking, and management structure win in a horse race as exogenous instruments for fund flow, while the fund turnover ratio and institutional share perform best as instruments for fund performance. We then demonstrate that endogeneity bias leads to inaccurate inferences in one-stage estimates, as evidenced by the reversals of the signs of flow and performance coefficient estimates when we switch to the IV approach. We find that careful attention to model specification allows us to resolve several widespread inconsistencies in the literature that were likely driven by model misspecification.     

The timing ability and global performance of Tunisian mutual fund managers: A multivariate GARCH approach

It is well-established in the financial literature that the global performance of mutual fund managers is the result of two skills: selectivity and market timing. This paper examines whether the multivariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) approach improves our perception of the global performance of fund managers compared with the unconditional approach and the conditional approach based on instruments. We find strong evidence that the multivariate GARCH method makes mutual fund performance looks better relative to the existent approaches, but this improvement in the global performance does not mean necessarily that mutual funds outperform traditional benchmarks. Indeed, mixed mutual funds yield neutral performance relative to benchmarks, whereas bond mutual funds generate significant positive global coefficients. The strong performance of bond fund managers comes from their ability to pick profitable bonds, not from their ability to time the market. Also, the empirical tests highlight that the best (worst) bond funds in the past remain at the top (bottom) of the ranking in the following years. These findings suggest that the Tunisian bond market presents strong opportunities for sophisticated investors.