This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Mutual fund tournament : risk taking incentives induced by ranking objectives

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Goriaev, A.
Palomino, F.
Prat, A. (Tilburg University, Center for Economic Research)

Additional information is available for the following registered author(s):

Abstract

There is now extensive empirical evidence showing that fund managers have relative performance objectives and adapt their investment strategy in the last part of the calendar year to their performance in the early part of the year. However, emphasis was put on returns in excess of some exogenous benchmark return. In this paper, we investigate whether fund managers have ranking objectives (as in a tournament). First, in a two-period model, we analyze the game played by two risk-neutral fund managers with ranking objectives. We derive conditions on the set of possible strategies under which the aggregate amount of risk undertaken in the late period is larger than in the first period. In the second part of the paper, we provide evidence that (i) funds have risk incentives generated by ranking objectives, (ii) risk induced by ranking objectives is mainly idiosyncratic, and (iii) risk incentives generated by ranking objectives are stronger for funds ranked in the top decile after the first part of the year.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://arno.uvt.nl/show.cgi?fid=4140
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 94.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: 2000
Date of revision:
Handle: RePEc:dgr:kubcen:200094

Contact details of provider:
Web page: http://center.uvt.nl

For technical questions regarding this item, or to correct its listing, contact: (Corry Stuyts).

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Meyer, Margaret A & Vickers, John, 1995. "Performance Comparisons and Dynamic Incentives," CEPR Discussion Papers 1107, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Khorana, Ajay, 1996. "Top management turnover An empirical investigation of mutual fund managers," Journal of Financial Economics, Elsevier, vol. 40(3), pages 403-427, March. [Downloadable!] (restricted)
  3. Chevalier, Judith & Ellison, Glenn, 1997. "Risk Taking by Mutual Funds as a Response to Incentives," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1167-1200, December.
    Other versions:
  4. Huddart, Steven, 1999. "Reputation and performance fee effects on portfolio choice by investment advisers1," Journal of Financial Markets, Elsevier, vol. 2(3), pages 227-271, August. [Downloadable!] (restricted)
  5. Ippolito, Richard A, 1992. "Consumer Reaction to Measures of Poor Quality: Evidence from the Mutual Fund Industry," Journal of Law & Economics, University of Chicago Press, vol. 35(1), pages 45-70, April.
  6. Hvide, H.K., 1999. "Tournament Rewards and Risk Taking," Papers 32-99, Tel Aviv.
    Other versions:
  7. Brown, Keith C & Harlow, W V & Starks, Laura T, 1996. " Of Tournaments and Temptations: An Analysis of Managerial Incentives in the Mutual Fund Industry," Journal of Finance, American Finance Association, vol. 51(1), pages 85-110, March. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gyöngyi Lóránth & Emanuela Sciubba, 2006. "Relative Performance, Risk and Entry in the Mutual Fund Industry," Birkbeck Working Papers in Economics and Finance 0612, Birkbeck, School of Economics, Mathematics & Statistics. [Downloadable!]
    Other versions:
  2. F. Palomino & H. Uhlig, . "Should smart investors buy funds with high returns in the past?," Sonderforschungsbereich 373 2002-28, Humboldt Universitaet Berlin.
    Other versions:
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by encouraging others to register as authors.

This page was last updated on 2008-7-29.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.