INVESTMENT PERFORMANCE OF INTERNATIONAL MUTUAL FUNDS

In this paper we add several new perspectives to the growing body of empirical evidence on the investment performance of international mutual funds by applying a pooled cross-sectional/time-series regression methodology to a large data base over an extended period. Risk-adjusted and unadjusted investment returns are not related to whether a fund is load or no-load, and asset size, expense ratios, and turnover rates are not related to investment performance. We find no reward for paying a load fee when investing in mutual funds. It is noteworthy that performance is not affected by fund size, given the explosive growth of international mutual funds.     

DETERMINANTS OF PERSISTENCE IN RELATIVE PERFORMANCE OF MUTUAL FUNDS

Similar to previous studies, we investigate the relation between past and future fund performance. However, we deviate from previous studies by investigating the relation between persistent fund performance and four systematic factors: size, goal, load, and management fee. Results indicate no consistent relation between fund size and persistent fund performance. The existence of a sales charge does not affect persistent fund performance. The goal of a fund does affect persistent fund performance, with high-risk maximum capital gain funds' demonstrating a strong positive persistence in abnormal returns. In addition, funds with low management fees demonstrate significantly positive persistent fund performance, while funds with high management fees demonstrate significantly negative persistent fund performance. Further research into the relation between persistent fund performance and maximum capital gain funds indicates persistent fund performance in both inferior- and superior-performing funds. However, persistence in funds with low management fees occurs only in funds with superior past performance.     

IMPORTANCE OF THE FUND MANAGEMENT COMPANY IN THE PERFORMANCE OF SOCIALLY RESPONSIBLE MUTUAL FUNDS

We compare the performance of a sample of U.K.‐based socially responsible investment (SRI) funds with similar conventional funds using a matched‐pair analysis based on size, age, investment universe, and fund management company (FMC). We find that both the SRI and conventional funds outperform the market index about 50% of the time, even after fees. Subsample tests show that the SRI funds in our sample perform better in the pre‐ and postfinancial crisis periods but underperform during the financial crisis period. Importantly, we find that the FMC plays a major role in the outperformance of both SRI and conventional funds.     

THE EFFECTS OF MUTUAL FUNDS ON M&A COMPENSATION

Motivated by shareholders’ interest in combating executive wealth expropriation through the merger and acqusition (M&A) process, we study how mutual funds influence firm behavior around an acquisition through votes against management proposals. We find that mutual funds reduce the chief executive officer's ability to extract rents during the M&A process by voting against management‐sponsored compensation proposals after the acquisition, thus lowering both excess compensation and increasing pay‐for‐performance sensitivity. Furthermore, mutual fund voting magnifies the impact on negatively performing firms and firms with a larger amount of the mutual fund's holdings in the firm.     

UNDERWRITER REPUTATION AND AFTERMARKET PERFORMANCE OF CLOSED‐END FUNDS

I find a positive relation between underwriter reputation and the initial and long‐run aftermarket performance of closed‐end funds. This relation persists even after controlling for fund characteristics, types, and investment strategies. The positive relation between underwriter reputation and initial returns supports the notion that prestigious investment bankers tend to promote a price run‐up in the immediate aftermarket to enhance their reputation with the issuers and the investors. The better long‐run performance for funds underwritten by prestigious underwriters suggests that prestigious underwriters protect their reputation by underwriting only high‐quality issues that will perform well in the long run.     

WINDOW DRESSING IN BOND MUTUAL FUNDS

We examine portfolio credit quality holding and daily return patterns in a large sample of bond mutual funds and document evidence of window dressing. Using portfolio credit quality holdings data, we find that bond funds on average hold significantly more government bonds during disclosure than nondisclosure, presumably to present a safer portfolio to shareholders. Multiple‐index market models estimated with daily returns data corroborate these findings. We detect differences in factor loadings on days surrounding disclosure dates that indicate systematic tilting of the portfolio toward higher quality instruments.     

THE PERFORMANCE OF UK CLOSED-END FUNDS: A COMPARISON OF THE VARIOUS RANKING CRITERIA

This study considers the performance of UK Investment Trusts over the ten-year period 1968 to 1977, using the major criteria suggested in the literature. The results indicate that UK closedend funds were generally inferior (ex post) to the market portfolio (FT Actuaries All-Share Index). These findings were invariant to the particular peiformance methodology selected. When the overall test period was broken up into sub-periods it was also found that the ex post performance findings were not particularly stable or consistent over time. These results highlight the problems a fund investor would face in attempting to predict future fund performance on the basis of historical results.     

MUTUAL FUND PERFORMANCE IN THE CONTEXT OF MODELS OF EQUILIBRIUM CAPITAL ASSET PRICING

This paper examines the question of mutual fund performance within an equilibrium asset pricing framework, and in particular gives attention to the reinterpretation of tests of fund performance provided by Peasnell, Skerratt and Taylor ( JBFA 1979). The paper concludes that the reinterpretation provided by Peasnell et. al is flawed, and moreover, that prospects for some new interpretation are bleak.     

MUTUAL FUND PERFORMANCE PERSISTENCE AND COMPETITION: A CROSS‐SECTOR ANALYSIS

Existing work on mutual fund performance persistence obtains diverse results, depending on the group of funds studied. We examine whether performance persistence within a peer group of competing mutual funds depends on the group's composition. The U.K. mutual fund industry is ideal for such an examination because funds compete within strictly defined sectors. We consider several attributes related to the intensity of competition within a sector and use them to explain sector‐level persistence. We find robust evidence that persistence is higher in sectors where concentration of assets under management is higher.     

EX‐DIVIDEND DAY PRICE BEHAVIOR OF EXCHANGE‐TRADED FUNDS

We document that for exchange‐traded funds (ETFs), the price falls on average by the dividend amounts on the ex‐dividend day, and there are significantly positive abnormal volumes. This is because trading in ETFs entails lower transaction costs and lower risk than trading in equity closed‐end funds (CEFs) and individual stocks. Similar results are also found for equity CEFs. However, regression analyses indicate that transaction costs and risk are indeed negligible for ETFs but not for equity CEFs and that risk remains important for a sample of stocks matched based on transaction costs. Overall, the results support the short‐term traders hypothesis.