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on Financial Markets |
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Issue of 2012‒05‒08
five papers chosen by |
| By: | patel, saurin; sarkissian, sergei |
| Abstract: | The literature has conflicting reports regarding the impact of group decision making on performance. We first observe that in mutual fund studies this results from large discrepancies in reported managerial structures between CRSP and Morningstar databases reaching on average 20% per year. Then we show that with more superior Morningstar data team-managed funds exhibit higher risk-adjusted returns than single-managed funds. The performance spread is present across all fund categories, except aggressive funds, and is robust to the inclusion of fund- and manager-level controls. Across various managerial structures, the largest team-induced gains are reached among funds managed by three individuals. Furthermore, teams significantly improve fund performance when funds are located in financial centers, reflecting larger networking potential and/or better skills of people who reside in larger cities. This improvement is achieved in teams more homogeneous in age and education. In spite of higher returns however, team-managed funds are not riskier than single-managed funds in terms of market exposure or idiosyncratic volatility. Finally, team-managed funds trade less aggressively and are able to generate extra inflows for their funds. Thus, collective decision making is beneficial, but its scale depends on team size and diversity as well as its geographic location. |
| Keywords: | Knowledge spillover; Management structure; Performance evaluation; Team diversity |
| JEL: | G23 J24 |
| Date: | 2012–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:38496&r=fmk |
| By: | Otavio Ribeiro de Medeiros and Vitor Leone |
| Abstract: | Based on a method developed by Leybourne, Kim and Taylor (2007) for detecting multiple changes in persistence, we test for changes in persistence in the dividend-price ratio of the NASDAQ stocks. The results confirm the existence of the so-called Dotcom bubble around the last turn of the century and its start and end dates. Furthermore, we compare the results with a test for detecting and date-stamping explosive unit-root behaviour developed by Phillips, Wu and Yu’s (2011) also applied to the NASDAQ price and dividend indices. We find that Leybourne, Kim and Taylor’s test is capable of detecting the Dotcom bubble as much as Phillips, Wu and Yu’s test is, but there are significant differences between the bubble start and end dates suggested by both methods and between these and the dates reported by the financial media. We also find an unexpected negative bubble extending from the beginning of the 1970s to the beginning of the 1990s where the NASDAQ stock prices were below their fundamental values as indicated by their dividend yields, which has not been reported in the literature so far. |
| Keywords: | Multiple changes in persistence, Explosive behaviour, Unit roots, Dotcom Bubble, NASDAQ. |
| JEL: | C10 C32 F15 G12 G14 G15 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbs:wpaper:2012/02&r=fmk |
| By: | Francis Breedon (Queen Mary, University of London) |
| Abstract: | We undertake a variance decomposition of index-linked bond returns for the US, UK and Iceland. In all cases, news about future excess returns is the key driver though only for Icelandic bonds are returns independent of inflation. |
| Keywords: | Index-linked bonds, Variance decomposition, Real interest rate |
| JEL: | E43 G12 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp688&r=fmk |
| By: | Mero, Gulten; Darolles, Serge |
| Abstract: | This paper develops a dynamic approach for assessing hedge fund risk exposures. First, we focus on an approximate factor model framework to deal with the factor selection issue. Instead of keeping the number of factors unchanged, we apply Bai and Ng (2002) and Bai and Ng (2006) to select the appropriate factors at each date. Second, we take into account the instability of asset risk profile by using rolling period analysis in order to estimate hedge fund risk exposures. Individual fund returns instead of index returns are employed in the empirical application to better understand the covariation structure of the data: the common behavior of hedge fund returns is filtered not only from the past historical data (time- series dimension), but also from the cross-section of returns. Finally, we apply our approach to equity hedge funds and replicate the returns of the aggregated index. |
| Keywords: | Hedge funds; mutual funds; financial risk; risk exposure; |
| JEL: | G12 C52 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/9111&r=fmk |
| By: | Mario Cerrato; Moorad Choudhry; John Crosby; John Olukuru |
| Abstract: | The eight years from 2000 to 2008 saw a rapid growth in the use of securitization by UK banks. We aim to identify the reasons that contributed to this rapid growth. The time period (2000 to 2010) covered by our study is noteworthy as it covers the pre-financial crisis credit- boom, the peak of the financial crisis and its aftermath. In the wake of the financial crisis, many governments, regulators and political commentators have pointed an accusing finger at the securitization market - even in the absence of a detailed statistical and economic analysis. We contribute to the extant literature by performing such an analysis on UK banks, fo- cussing principally on whether it is the need for liquidity (i.e. the funding of their balance sheets), or the desire to engage in regulatory capital arbitrage or the need for credit risk trans- fer that has led to UK banks securitizing their assets. We show that securitization has been significantly driven by liquidity reasons. In addition, we observe a positive link between securitization and banks credit risk. We interpret these latter findings as evidence that UK banks which engaged in securitization did so, in part, to transfer credit risk and that, in comparison to UK banks which did not use securitization, they had more credit risk to transfer in the sense that they originated lower quality loans and held lower quality assets. We show that banks which issued more asset-backed securities before the financial crisis suffered more defaults after the financial crisis. |
| JEL: | G21 G28 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2012_06&r=fmk |