Two Essays on Equity Mutual Funds

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dc.contributor.authorJaiprakash, Puneeten
dc.contributor.committeechairKumar, Ramanen
dc.contributor.committeememberChen, Yongen
dc.contributor.committeememberKeown, Arthur J.en
dc.contributor.committeememberKadlec, Gregory B.en
dc.contributor.departmentFinance, Insurance, and Business Lawen
dc.date.accessioned2014-03-14T21:18:10Zen
dc.date.adate2011-09-08en
dc.date.available2014-03-14T21:18:10Zen
dc.date.issued2011-08-05en
dc.date.rdate2011-09-08en
dc.date.sdate2011-08-24en
dc.description.abstractPrevious research has shown that expected market returns vary over time and that this variation can be predicted by variables such as dividend yields and book-to-market ratios (Fama and French (1989); Campbell and Thompson (2008)). Further, macroeconomic variables affect asset returns (Flannery and Protopapadikas (2002)). We investigate whether the investment decisions of mutual fund investors incorporate information about future stock returns contained in predictive and macroeconomic variables. If investors incorporate this information, then variation in flows should be related to that in predictive variables and macroeconomic variables. Using quarterly flow data from 1951Q4 to 2007Q4, we find that both predictive and macroeconomic variables have a relatively small impact on flows. Our results suggest that fund investors, as a group, fail to adequately incorporate the information contained in these variables. Existing literature documents that (i) an asymmetric low-performance relationship creates an incentive for managers to extract rents from shareholders, and (ii) managers respond to such incentives by strategically altering portfolio risk. Using the semiparametric regression model proposed by Chevalier and Ellison (1997), we show that the flow-performance relationship has become linear in recent years (2000-2009) and fund managers no longer respond to such incentives. Fund managers, however, change portfolio risk in response to past performance; such changes have a positive impact on fund performance and are indicative of a better alignment of interests between managers and shareholders.en
dc.description.degreePh. D.en
dc.identifier.otheretd-08242011-163903en
dc.identifier.sourceurlhttp://scholar.lib.vt.edu/theses/available/etd-08242011-163903/en
dc.identifier.urihttp://hdl.handle.net/10919/39224en
dc.publisherVirginia Techen
dc.relation.haspartJaiprakash_PK_D_2011.pdfen
dc.rightsIn Copyrighten
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/en
dc.subjectFund Flowsen
dc.subjectConflicts of Interesten
dc.subjectSemiparametric Regressionen
dc.subjectFlow-performance Relationshipen
dc.subjectReturn Predictabilityen
dc.subjectMacroeconomic Variablesen
dc.titleTwo Essays on Equity Mutual Fundsen
dc.typeDissertationen
thesis.degree.disciplineFinance, Insurance, and Business Lawen
thesis.degree.grantorVirginia Polytechnic Institute and State Universityen
thesis.degree.leveldoctoralen
thesis.degree.namePh. D.en

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