This paper investigates hedge fund performance and risk. The empirical evidence indicates that hedge funds differ substantially from traditional investment vehicles such as mutual funds. The funds with watermarks significantly outperform the funds without watermarks. The average hedge fund returns are related positively to incentive fees, the size of the fund, and the lockup period. Hedge funds...

Using detailed stockholding for a comprehensive sample of Chinese mutual funds from 2004 to 2009, we investigate the economy of scale and liquidity on the relation between fund size and performance. We find that there exists an inverted U-shape relation between fund size and performance accounting for various performance benchmarks. Both economy of scale and liquidity exist and play an importan...

This paper compares the two bootstrap methods of Kosowski et al. (2006) and Fama and French (2010) using a new dataset on equity mutual funds in the UK. We find that: the average equity mutual fund manager is unable to deliver outperformance from stock selection or market timing, once allowance is made for fund manager fees and for a set of common risk factors that are known to influence return...

We study how competition in the mutual fund industry affects the stock market and its liquidity. We argue that mutual fund families operate as multi-product firms, jointly choosing fees, performance and number of funds. We show that competition between fund families distorts the incentives to collect information and induces the families to trade off performance and number of funds. An increase ...

In this paper, I analyze re-pricing decisions for mutual fund management services. I derive measures of performance and price sensitivity and show that investors do not consider expense ratios simply as a negative component of expected returns: while performance sensitivity monotonically increases with past performance, price-sensitivity does not. Investors that buy top pastperformers seems to ...

We consider the problem of a mutual fund manager that maximizes the present value of expected fees and has to decide the level of fee to impose on the fund. The fee will be paid by a risk averse investor that maximizes expected utility over final wealth. This investor can invest either in an indexed fund or in a managed fund. The manager has superior ability and, as a result of it, the fund off...

We investigate the effectiveness of window-dressing as a potential strategy to be used by mutual fund managers to promote fund flows. Using a rank gap measure as a proxy for the likelihood that window-dressing has occurred, we find that fund investors as whole punish those managers who are suspected to have engaged in window-dressing. That is, we find a negative relation between the window-dres...

This paper proposes an alternative mutual funds performance evaluation measure in the context of multicriteria decision making. Fund performance evaluation has been the topic of numerous studies for the last four decades with controversial results. We implement an original methodology on Greek domestic equity funds for the period 2000–2009. Employing a unique dataset of risk adjusted returns su...

Measures for evaluating the performance of a mutual fund or other managed portfolio are interpreted as the difference between the average return of the fund and that of an appropriate benchmark portfolio. Traditional measures use a fixed benchmark to match the average risk of the fund. Conditional performance measures use a dynamic strategy as the benchmark, matching the fund’s risk dynamics. T...

By using a unique dataset of Finnish mutual funds and fund managers, we investigate whether manager ownership is related to fund performance. When we examine manager ownership measured as a percentage of the fund’s total assets, we find no relation between ownership and performance. This finding contradicts with US evidence. Further, when we employ ownership measured as a percentage of the mana...