The use of derivatives in the spanish mutual fund industry
AbstractWe study the use of derivatives in the Spanish mutual fund industry. The picture that emerges from our analysis is rather negative. In general, the use of derivatives does not improve the performance of the funds. In only one out of eight categories we find some (very weak and not robust) evidence of superior performance. In most of the cases users significantly underperform non users. Furthermore, users do not seem to exhibit superior timing or selectivity skills either, but rather the contrary. This bad performance is only partially explained by the larger fees funds using derivatives charge. Moreover, we do not find evidence of derivatives being used for hedging purposes. We do find evidence of derivatives being used for speculation. But users in only one category exhibit skills as speculators. Finally, we find evidence of derivatives being used to manage the funds\' cash inflows and outflows more efficiently.
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Bibliographic InfoPaper provided by Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales in its series Working Papers with number 2007-22.
Date of creation: 28 Oct 2007
Date of revision:
mutual funds; derivative use; risk management;
Other versions of this item:
- José M. Marín & Thomas A. Rangel, 2006. "The use of derivatives in the Spanish mutual fund industry," Economics Working Papers 990, Department of Economics and Business, Universitat Pompeu Fabra.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G2 - Financial Economics - - Financial Institutions and Services
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-17 (All new papers)
- NEP-EEC-2007-11-17 (European Economics)
- NEP-FMK-2007-11-17 (Financial Markets)
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