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- Title
- On Mutual Fund Family Diversification, Performance, Persistence and Flows.
- Creator
- Kaprielyan, Margarita, Agapova, Anna, Florida Atlantic University, College of Business, Department of Finance
- Abstract/Description
-
The first essay introduces a portfolio theory motivated approach to measuring mutual fund family-level diversification and hedging strategies. Diversification of idiosyncratic risk (systematic risk) is measured by the average cross-fund correlation in idiosyncratic returns (predicted returns from the multifactor model). Using new methodology, I find evidence of cross-sectional variation in family-level diversification and examine several fund families’ characteristics as the determinants of...
Show moreThe first essay introduces a portfolio theory motivated approach to measuring mutual fund family-level diversification and hedging strategies. Diversification of idiosyncratic risk (systematic risk) is measured by the average cross-fund correlation in idiosyncratic returns (predicted returns from the multifactor model). Using new methodology, I find evidence of cross-sectional variation in family-level diversification and examine several fund families’ characteristics as the determinants of this crosssectional variation. On average, fund families that offer more objectives are more diversified in terms of both idiosyncratic and systematic risks; however, in the subsample of larger fund families, greater number of objectives is associated with increase (decrease) in idiosyncratic (systematic) risk diversification. Families that concentrate in the retail sector are more diversified. I also find that less diversification of idiosyncratic risk on the family level is associated with better risk-adjusted performance, while greater diversification of systematic risk is associated with greater performance during an economic downturn. The second essay examines whether new measures of diversification are additional determinants of fund family flows and flow volatility. I find that fund family capital flows increase in systematic risk focus, as more of the fund family’s assets are held by institutional investors. Family flow volatility decreases in diversification of systematic risk during market downturn, increase in market uncertainty and during recession. I further find that families with greater concentration in the retail sector (institutional sector) exhibit less family capital flow volatility as the diversification of systematic risk (idiosyncratic risk) increases. Fund-level volatility of focused and concentrated funds within diversified families is greater than in less diversified families, signaling that diversification on the family level may decrease participation costs for the investors. Moreover, in support of participation cost hypothesis, I find that the performance of worst performing funds within fund families increases in the family-level diversification; thus, family-level diversification affects the convexity in the fund flowperformance relation documented in the previous studies. On the family-level, diversification is associated with convexity in flow-performance relation, while family focus with more direct flow-performance relation.
Show less - Date Issued
- 2017
- PURL
- http://purl.flvc.org/fau/fd/FA00004990
- Subject Headings
- Dissertations, Academic -- Florida Atlantic University
- Format
- Document (PDF)
- Title
- Strategic information disclosure when there is fundamental disagreement: an empirical investigation.
- Creator
- Volkov, Nikanor, Agapova, Anna, Florida Atlantic University, College of Business, Department of Finance
- Abstract/Description
-
I empirically investigate the managements’ decision to voluntarily disclose strategic information. While carrying a benefit of reduced information asymmetry, strategic information disclosure carries a cost of investors disagreeing with managements’ strategy and thus refusing to provide funding to the firm. Using a hand- collected sample of information releases, I identify firm characteristics that affect the likelihood of strategic information disclosure.
- Date Issued
- 2015
- PURL
- http://purl.flvc.org/fau/fd/FA00004473, http://purl.flvc.org/fau/fd/FA00004473
- Subject Headings
- Corporate governance, Corporations -- Auditing, Disclosure of information, Management information systems, Social responsibility of business, Strategic planning
- Format
- Document (PDF)
- Title
- Two Essays on Mutual Funds Herding and the Information Content of Their Trades.
- Creator
- Carrete Rodriguez, Angel Francisco, Agapova, Anna, Florida Atlantic University, College of Business, Department of Finance
- Abstract/Description
-
Information asymmetry literature has developed models that explain the relation between uninformed traders and informed traders. In general, these models have shown that first, information asymmetry is a driving force for investor buying and selling behavior. Second, the trades of informed investors reveal some of the information they possess suggesting that the trades of informed investors are informative to market makers. Third, when information about a stock enters the market, the...
Show moreInformation asymmetry literature has developed models that explain the relation between uninformed traders and informed traders. In general, these models have shown that first, information asymmetry is a driving force for investor buying and selling behavior. Second, the trades of informed investors reveal some of the information they possess suggesting that the trades of informed investors are informative to market makers. Third, when information about a stock enters the market, the characteristics of the firm can change, e.g., a better information environment reduces the cost of capital (Admati, 1985; Easley and O‟Hara, 2004; Wang, 1993). In this study, I apply information asymmetry theory to explore the trading behavior of active equity mutual fund managers and their role as facilitators of information. In the first essay, I study the information environment of firms mutual funds choose to add to their holdings and how it changes after the inclusion. I identify all new additions to the mutual fund holdings universe from 2002 to 2015 and compare them to the available universe of firms not yet owned by mutual funds. I find that active equity mutual fund managers behave as informed investors and prefer to buy stocks with more opaque information environments i.e., firms with larger spreads, lower trading volume, smaller firms with more growth opportunities, and firms that tend to use more accruals. Fund managers also show a preference for firms that have less analyst following, those in which analysts are less likely to agree on their EPS estimates, and firms in which analysts are more likely to err in their predictions. In other words, mutual fund managers prefer firms that are more likely to be mispriced. Once the funds include the firms, I document a strong improvement in their information environment. Firms attract more analyst coverage, reduce its use of accruals, produce more guidance, increase their market cap, and show increased turnover. The second essay focuses on the herding behavior of mutual funds. The study is the first to document the herding of mutual fund managers after creation of toehold positions by portfolio managers. I use a hand-collected dataset consisting of all toehold acquisitions reported to the SEC from 1995 to 2015 to document a strong herding reaction of active equity mutual funds after toehold announcements. This herding reaction is several times stronger than other mutual fund herding events reported by previous literature. I also document that the strength of the herding reaction varies depending on the identity of the filer or the characteristics of the firm acquired. The herding reaction is stronger for toehold announcements of firms with a smaller market capitalization, better growth opportunities, and those that are more illiquid. I also find that the herding reaction is weaker after the filings of hedge fund managers. My results support the informational herding cascade hypothesis.
Show less - Date Issued
- 2018
- PURL
- http://purl.flvc.org/fau/fd/FA00013127
- Subject Headings
- Information asymmetry, Mutual funds, Herding
- Format
- Document (PDF)