Mutual fund expenses: Evidence on the effect of distribution channels

This paper employs a new set of variables in examining the determinants of fund expenses. The Finnish Association of Mutual Funds requires the industry to disclose new variables such as turnover and tracking error from 2002. Using this information the authors examine whether bank-managed funds are managed more actively than their non-bank competitors, which would explain their higher management fees. Equity and balanced funds distributed through bank offices charge higher expense ratios than funds distributed through independent fund management companies. The results suggest that existing customer relationship, bank cross-selling and convenience rather than operational expenses contribute to fund selection of bank mutual fund customers.     

SEC Rule 14a-8 shareholder proposals: No-action requests,determinants, and the role of SEC staff

Under SEC Rule 14a-8, shareholders can petition management to include a topic for vote on the annual proxy statement. In response, management may request no-action relief from the Securities and Exchange Commission (SEC) staff to exclude unwelcome proposals. Using a sample of 3,040 no-action letters from the SEC between 2008 and 2019, I examine the determinants of the SEC staff’s decision to grant no-action relief. I find that legal characteristics, pressures on the staff, and proposal attributes have a statistically significant association with the SEC’s decision. Beyond these factors, I find evidence individual SEC staff members differ in the likelihood that they grant no-action relief. On average, these staff members appear to add value, as evidenced by a positive market response to their decisions, but this favorable valuation effect is concentrated among relatively more experienced staff.     

Mutual fund liquidity timing ability in the higher moment framework

Using mutual fund data in Thailand, this study shows that fund managers can time the market-wide liquidity in the higher moment framework. High-performing fund managers demonstrate significantly positive liquidity timing ability, while low-performing fund managers do not. Thus, high-performing fund managers increase (decrease) the funds' exposure to the market during a high (low) market liquidity period, while low-performing fund managers do not show the liquidity timing ability. Moreover, only top-performing bank-related mutual funds possess the liquidity timing ability, supporting the information advantage hypothesis. Nonbank-related funds do not possess the liquidity timing ability at both the aggregate and portfolio levels. Several robustness tests confirm the findings.     

Blurred stars: Mutual fund ratings in the shadow of conflicts of interest

Using unique data on trading commission payments to mutual fund rating companies (MFRCs) by mutual funds in China, this paper investigates whether the conflicts of interest arising from trading commission payments bias MFRCs’ mutual fund star ratings and hence affect their informativeness. We find the rating of a mutual fund is more optimistic when the MFRC either (i) receives trading commission fees from the mutual fund or (ii) can potentially receive fees in the future. The paper further shows that the usefulness of ratings in terms of predicting a fund’s future performance is negatively impacted by conflicts of interest. There is also evidence that investors can see through the problem, responding less enthusiastically (in terms of fund flows) to the ratings of conflicted MFRCs. We further find that the introduction of a rating qualification system that aims to improve mutual fund rating quality exacerbates the rating bias.     

Dumb money: Mutual fund flows and the cross-section of stock returns

We use mutual fund flows as a measure of individual investor sentiment for different stocks, and find that high sentiment predicts low future returns. Fund flows are dumb money–by reallocating across different mutual funds, retail investors reduce their wealth in the long run. This dumb money effect is related to the value effect: high sentiment stocks tend to be growth stocks. High sentiment also is associated with high corporate issuance, interpretable as companies increasing the supply of shares in response to investor demand.     

Mutual fund distribution fees: An empirical analysis of the impact of deregulation

The Securities and Exchange Commission's Rule 12b-1 ended a 40-year prohibition on the payment of distribution fees by mutual funds. The fees have the potential to create conflicts between fund managers and shareholders. This study examines the characteristics of funds implementing the plans, and assesses costs and benefits. Findings reveal that there is a growing tendency of funds, particularly load funds, to adopt the plans. The costs have begun to increase dramatically in recent years though some load funds with plans have begun reducing their loads. However, 12b-1 plans do not seem to contribute to the expense ratios of funds oriented toward capital gains. The plans offer the intangible benefit of spreading load charges across time, thus increasing a fund's attractiveness to a broader range of investors.Various versions of this article have been presented at seminars at the Securities and Exchange Commission, and the Universities of Colorado, Connecticut, Michigan State, Pittsburgh, Kentucky, South Carolina, and Missouri, and at the Financial Management Association.     

Mutual fund herding its impact on stock returns: Evidence from the Taiwan stock market

Using quarterly ownership data which identify identity codes of mutual funds in Taiwan, we investigate mutual fund herding and its impact on stock price. We show that mutual funds tend to follow their own steps in trading rather than follow trades made by other funds. More importantly, evidence of price continuation following mutual fund herd buying suggests that such herding is based on value-relevant information and is consistent with the investigative herding hypothesis. Alternatively, evidence of return reversal following mutual fund herd selling suggests that such herding is non-informational and is consistent with the characteristic herding hypothesis.     

Earnings changes associated with relaxing the reconciliation requirement in non-U.S. firms’ SEC filings

We investigate the changes in earnings information content and earnings attributes for non-U.S. firms listed in U.S. equity markets following the 2007 relaxation of the SEC requirement to reconcile IFRS earnings and stockholders’ equity to U.S. GAAP in annual regulatory filings. We analyze a sample of non-U.S. firms listed on U.S. exchanges from 2005 to 2008 that use IFRS, and compare them to non-U.S. firms that continue to use domestic GAAP or U.S. GAAP. Prior literature finds no changes in informativeness following the regulatory change for IFRS-using firms. However, when we partition the IFRS-using firms into two groups based on their history of providing reconciliation information, we find that firms which previously provided more information about the differences between their reporting GAAP and U.S. GAAP had significant increases in the information content of their earnings. In contrast, there is no change in earnings informativeness for firms that provided less informative reconciliations. We regard the reconciliation informativeness as a proxy for firms’ efforts to provide more informative disclosures, which is driven by their disclosure incentives. We also document that the change in the information content of earnings for more informative reconcilers was contemporaneous with a change in earnings attributes for these firms. Consistent with no change in earnings informativeness for less informative reconcilers, there is little change in their earnings attributes. Our results underscore the importance of incorporating disclosure incentives when examining the consequences of a regulatory change.     

Managerial actions in response to a market downturn: valuation effects of name changes in the dot.com decline

We investigate stock price reactions to Internet-related name changes in a market downturn. In contrast to the Internet boom period, during which there was a surge of dot.com additions, in the bust period, there is a dramatic reduction in the pace of dot.com additions accompanied by a rapid increase in dot.com name deletions. Following the Internet “crash” of mid-2000, investors react positively to name changes for firms that remove dot.com from their name. This dot.com deletion effect produces cumulative abnormal returns on the order of 64% for the 60 days surrounding the announcement day. Our results add support to a growing body of literature that documents that investors are potentially influenced by cosmetic effects and that managers rationally time corporate actions to take advantage of these biases.     

Starting on the wrong foot: Seasonality in mutual fund performance

We document a systematic seasonal component in the aggregate underperformance of active mutual funds. At the aggregate level, active funds underperform the market and other passive benchmarks only in the first month of a quarter. This intra-quarter performance seasonality holds across fund sizes and investment styles. The pattern is consistent with short-term stock return reversal effects along with aggregate window-dressing and, to a lesser extent, NAV-inflation practices around quarter-ends. We find marginal or no evidence of microstructure biases, fund investor flows, or cash distributions as sources of this seasonality. Our findings highlight new features of the active management underperformance puzzle.     

从“互助”到“互惠”:经济欠发达农村地区老年照料的出路

作为我国传统的老年照料模式,家庭照料在欠发达农村地区正受到少子化和人口流动的冲击。与此同时,受制于欠发达的经济社会环境,福利照料模式和市场照料模式发育不良。一些地方尝试的互助养老时间银行等模式往往存在避重就轻避实就虚或可持续性差的问题。对此,本文提出,在欠发达农村地区发展类市场性质的互惠养老模式。该模式的主要参与者包括政府,村民自治组织,提供养老服务的村民,接受养老服务的失能、半失能老人及其家人;参与各方因各有所图而结合,各有所为而促进机制可持续运行,最终达到各有所获的制度目标。     

数量规则还是利率规则？——我国转型时期量价混合型货币规则的理论基础

本文对我国货币政策转型时期兼顾数量和价格的货币政策调控实践进行了深入的分析。在货币数量论和货币效用模型的基础上,从理论上阐明了货币数量规则与利率价格规则的等价关系,并构建了符合中国货币政策实践的数量与价格混合型货币政策规则。这对于更好地理解我国货币政策转型时期的量价混合型货币政策操作具有重要的理论和现实意义。相关推论表明,正是由于数量和价格混合型货币规则,在利率低于均衡水平的情形下,中国的货币增速并未引发恶性通胀;修正的物价稳定泰勒原理表明,利率调整幅度小于通胀变化仍能够实现物价稳定。对中国的经验分析支持了理论和推论结果。在利率市场化基本完成和流动性格局逆转的当下,货币政策价格调控方式转型的必要性和迫切性日益上升,转型的条件日趋成熟。     

数量规则还是利率规则？——我国转型时期量价混合型货币规则的理论基础

本文对我国货币政策转型时期兼顾数量和价格的货币政策调控实践进行了深入的分析。在货币数量论和货币效用模型的基础上,从理论上阐明了货币数量规则与利率价格规则的等价关系,并构建了符合中国货币政策实践的数量与价格混合型货币政策规则。这对于更好地理解我国货币政策转型时期的量价混合型货币政策操作具有重要的理论和现实意义。相关推论表明,正是由于数量和价格混合型货币规则,在利率低于均衡水平的情形下,中国的货币增速并未引发恶性通胀;修正的物价稳定泰勒原理表明,利率调整幅度小于通胀变化仍能够实现物价稳定。对中国的经验分析支持了理论和推论结果。在利率市场化基本完成和流动性格局逆转的当下,货币政策价格调控方式转型的必要性和迫切性日益上升,转型的条件日趋成熟。     

The oversight role of regulators: evidence from SEC comment letters in the IPO process

This study investigates how regulatory oversight affects the price formation of initial public offerings (IPOs). We provide evidence on the oversight role of the US Securities and Exchange Commission (SEC) by examining the effects of comment letters issued by the SEC in the process through which companies are initially listed. We find that IPO issuers reduce their offer price if they receive comment letters. The reduction in price from the IPO filing date to the final issue date is greater when the IPO firm has more correspondence with the SEC. The pricing impact of SEC comment letters is more pronounced for IPO issuers with greater hyping incentives. Moreover, we find that IPO firms that receive more comment letters have similar levels of underpricing and outperform over the long run after the issue date, compared with IPOs with fewer comment letters.     

Caught in the crossfire: How the threat of hedge fund activism affects creditors

Firms under the threat of hedge fund activism on average experience significant losses of outstanding bondholder wealth: their bond yields rise while prices fall and ratings deteriorate. Under-threat firms receive inferior terms when initiating new loans. These observations are more prominent in firms with weaker creditor rights protection and firms that experience more significant improvement in stock performance without accompanying real improvements. These findings are consistent with the manifestation of agency problems. Share repurchases funded by cash, investment cutbacks, and new debt issuances elevate share price, which increases the cost of intervention for activists but jeopardizes the interest of existing bondholders.     

Outsourcing in the International Mutual Fund Industry: An Equilibrium View

We study outsourcing relationships among international asset management firms. We find that, in companies that manage both outsourced and in‐house funds, in‐house funds outperform outsourced funds by 0.85% annually (57% of the expense ratio). We attribute this result to preferential treatment of in‐house funds via the preferential allocation of IPOs, trading opportunities, and cross‐trades, especially at times when in‐house funds face steep outflows and require liquidity. We explain preferential treatment with agency problems: it increases with the subcontractor's market power and the difficulty of monitoring the subcontractor, and decreases with the subcontractor's amount of parallel in‐house activity.     

从“互助”到“互惠”:经济欠发达农村地区老年照料的出路

作为我国传统的老年照料模式,家庭照料在欠发达农村地区正受到“少子化”和人口流动的冲击。与此同时,受制于“欠发达”的经济社会环境,福利照料模式和市场照料模式发育不良。一些地方尝试的“互助养老”“时间银行”等模式往往存在“避重就轻”“避实就虚”或可持续性差的问题。对此,本文提出,在欠发达农村地区发展类市场性质的“互惠养老”模式。该模式的主要参与者包括政府,村民自治组织,提供养老服务的村民,接受养老服务的失能、半失能老人及其家人;参与各方因各有所“图”而结合,各有所“为”而促进机制可持续运行,最终达到各有所“获”的制度目标。     

Changing investment styles: style creep and style gaming in the hedge fund industry

Notwithstanding their common features, hedge funds remain an extremely diverse asset class. Information on fund styles is important for numerous purposes, such as portfolio construction, performance attribution and risk management. With fund self‐declaration being prone to (strategic) misclassification, return‐based taxonomies grouping funds along similarities in realized returns provide a useful alternative. We provide a consistent classification system of homogeneous groups of hedge funds based on self‐organizing maps. Whereas some fund categories such as managed futures are largely consistent in their self‐declared strategies, others, especially so‐called ‘equity hedge’ funds, display no or very limited return similarities. Furthermore, we also find evidence of fund managers performing undisclosed changes of their trading style over time. Those funds that misclassified themselves once are particularly likely to change their trading style again. Although style self‐declaration can, therefore, be quite misleading, our results indicate that hedge funds do not misdeclare their style strategically to improve their relative performance. Copyright © 2006 John Wiley & Sons, Ltd.     

Persistent performance in the mutual fund market: Tests with funds and investment advisers

Recent studies of mutual funds have concluded that there is some evidence of superior performance. We test for the existence of superior performance and its persistence with mutual funds and mutual fund investment advisers on a data set of monthly returns from 1979 to 1989 for 1,387 mutual funds grouped by 243 advisers. We find no evidence of superior performance or its persistence but we do find significant evidence of persistence of inferior performance. Consistent with previous studies our findings depend on the benchmark chosen, with multiple benchmarks producing a larger degree of inferior performance.     

Follow the leader: fund managers trading in signal‐strength sequence*

When fund managers trade sequentially in the same direction, the information confirmation hypothesis predicts the long‐term profitability of the leader trade to be increasing in the number of subsequent trades. The information cascade hypothesis predicts a non‐positive relationship. Using active equity funds’ daily trading data, we document a transition from information confirmation to information cascades as the number of followers increase. We find that highly disguised multiple‐broker packages exhibit higher market impact, higher long‐term returns and are associated with fewer followers. Our study also documents that lead fund managers face portfolio risk constraints in trading on private information.