How Risk Averse are Fund Managers? Evidence from Irish Mutual Funds
AbstractThis 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 InfoPaper 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.
Date of creation: 2006
Date of revision:
Risk aversion; Fund managers; Dynamic conditional correlations.;
Other versions of this item:
- Thomas Flavin, 2006. "How risk averse are fund managers? Evidence from Irish mutual funds," Applied Financial Economics, Taylor and Francis Journals, vol. 16(18), pages 1355-1363.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- G20 - Financial Economics - - Financial Institutions and Services - - - General
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