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How Risk Averse are Fund Managers? Evidence from Irish Mutual Funds

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  • Thomas J. Flavin

    ()
    (Economics, National University of Ireland, Maynooth)

Abstract

This paper investigates the degree of risk aversion exhibited by Irish fund managers. Assuming a mean-variance optimising manager, we employ the dynamic conditional correlation specification (Engle, 2002) of the multivariate GARCH model to estimate the coefficient of relative risk aversion. We find that fund managers whose remit is to “aggressively” manage their portfolios have coefficients lying between 1.69 and 2.42, while the risk aversion parameter of “balanced” managed funds range from 3.24 to 3.69. Finally we discuss the implications of these numbers on the likelihood of these managers partaking in risky investments.

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Bibliographic Info

Paper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n1630206.

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Length: 24
Date of creation: 2006
Date of revision:
Handle: RePEc:may:mayecw:n1630206

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Postal: Maynooth, Co. Kildare
Phone: 353-1-7083728
Fax: 353-1-7083934
Web page: http://economics.nuim.ie
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Keywords: Risk aversion; Fund managers; Dynamic conditional correlations.;

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Cited by:
  1. Conniffe, Denis & O'Neill, Donal, 2012. "An Alternative Explanation for the Variation in Reported Estimates of Risk Aversion," IZA Discussion Papers 6877, Institute for the Study of Labor (IZA).

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