IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Behaviour and Investment Actions within Fund Managers and their Markets - Developing and analysing a grounded theory of fund management

Listed author(s):
  • John Holland
Registered author(s):

    The financial crisis of 2007-09 has raised questions concerning orthodox ideas of how financial markets operate and how financial institution firms (and their decision makers) behave in such market settings. The crisis has revealed the need for new thinking in these areas. This paper outlines a grounded theory of the fund management firm and investment decision making at the level of individuals and teams. The theory comprises the role of external and internal firm contexts on individual fund managers and teams and the funds they manage. It includes the properties of FM firm organisational contexts comprising order, creativity, knowledge, coherence and matching; and the relative peer group strengths of these properties. It includes the properties of individual and team contexts and their strengths. These contexts and their properties all purposefully interacted as collective and integrated FM organisational means (or dynamic system) to help individuals and teams to reduce the complexity of new information flows, to make sense of information, to avoid their own negative behaviour, to exploit the behaviour of others, to take investment decisions, to create diversified portfolios, and to produce FM financial performance (at the level of funds managed, and the firm overall). The FM value creation process, the continuous interaction (and periodic disclosure) with investee companies and with stock and information markets, and ongoing investment decision making at individual and team level, also led to cumulative FM learning and strategic choices about the perceived drivers of fund and market outcomes. The interaction and learning created new knowledge intensive contexts or priors for FM investment decision behaviour which then became drivers of subsequent investment decisions. The ongoing investment interactions, the longer term knowledge creating interactions, and the FM responses revealed the dynamic elements to FM investment behaviour. The FM contextual elements and dynamic interactions were common empirical patterns across case FMs. Variation in context and properties were used to tentatively explain, in part, FMs type or style. Variation in strength (weaknesses) of contextual properties (within a fund type or peer group) were used to tentatively explain, in part, differences in performance. A major function of the grounded theory may be to provide a new conceptual tool to fully investigate the reasons for such variety in FM styles. In addition it may provide a new tool to fully investigate and explain the reasons for pervasive and systematic FM underperformance rather than to explain the more unusual cases of success. The research was conducted through case interview field work in 20 large international FMs during 2004-2011 and use was made of archival sources. A grounded theory approach was employed in processing the data. The results were discussed relative to relevant literature and to previous grounded theory of FM. Areas for further research were identified.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    File Function: wp11057
    Download Restriction: no

    Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 11-057.

    in new window

    Length: 32 p.
    Date of creation: Dec 2011
    Publication status: Published by:
    Handle: RePEc:sol:wpaper:2013/105050
    Contact details of provider: Postal:
    CP114/03, 42 avenue F.D. Roosevelt, 1050 Bruxelles

    Phone: +32 (0)2 650.48.64
    Fax: +32 (0)2 650.41.88
    Web page:

    More information through EDIRC

    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.:

    in new window

    1. Terrance Odean, 1999. "Do Investors Trade Too Much?," American Economic Review, American Economic Association, vol. 89(5), pages 1279-1298, December.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:sol:wpaper:2013/105050. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.