Publication Type
Working Paper
Version
publishedVersion
Publication Date
6-2008
Abstract
This paper re-examines the incentives of mutual fund managers arising from investor flows. We provide evidence that the convexity of the flow-performance relationship varies with economic activity. We show that the effect is economically large and is not driven by abnormal years. We test two possible channels through which this pattern may arise. We investigate implications of the timevarying convexity for the incentives of managers to alter strategically the risk of their portfolios. We provide evidence that poor mid-year performers increase the risk of the portfolio only when economic activity is strong. Finally, we briefly discuss some methodological implications.
Keywords
Mutual funds, Incentives, Flow-Performance Relationship, Convexity, Business Cycles
Discipline
Econometrics | Finance
Research Areas
Econometrics
First Page
1
Last Page
48
Publisher
SMU Economics and Statistics Working Paper Series, No. 10-2008
City or Country
Singapore
Citation
OLIVIER, Jacques and TAY, Anthony S..
Time-varying incentives in the mutual fund industry. (2008). 1-48.
Available at: https://ink.library.smu.edu.sg/soe_research/1115
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.