Double or Nothing: Patterns of Equity Fund Holdings and Transactions

Brown, Stephen J.; Swan, Peter L.; Steenbeek, Onno W.; Gallagher, David R.

doi:10.2139/ssrn.555423

Cited by 30 publications

(14 citation statements)

References 31 publications

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“…3 For a detailed discussion of risk management practices in the Australian investment management industry, see Brown et al (2005). Prior studies examining US 2 Accounting regulators have formulated standards which require the disclosure of nominal contract exposures and fair value of derivative instruments in financial accounting statements.…”

Section: Introductionmentioning

confidence: 99%

The Use of Derivatives by Investment Managers and Implications for Portfolio Performance and Risk^*

Fong¹,

Gallagher

Ng³

2005

Int Rev Finance

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This study provides an empirical examination of derivative instruments used by institutional investors. Our analysis provides a unique insight into the role and benefits of derivative securities in active equity portfolio management. We contribute to the literature by using a database that comprises the periodic portfolio holdings and daily trades of institutional fund managers. The consequence of derivative use is analyzed using a number of performance and risk measures. Overall, we find the use of derivatives have a negligible impact on fund returns, and is primarily attributed to low levels of derivative exposure relative to total fund size. We also evaluate how derivatives are used by considering the trading strategies executed by active investment managers. Specifically, option trading patterns are consistent with the execution of momentum trading strategies. This study also documents that active investment managers prefer not to use options markets to engage in informed trading.

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Section: Introductionmentioning

confidence: 99%

The Use of Derivatives by Investment Managers and Implications for Portfolio Performance and Risk^*

Fong¹,

Gallagher

Ng³

2005

Int Rev Finance

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“…That market participants behave rationally is an assumption being called into question in the behavioural finance literature (Barberis et al, 1998;Odean, 1998Odean, , 1999. Our database provides a unique opportunity to test whether informed traders behave rationally and thus provide insights into the degree to which institutional traders are susceptible to irrational or 'informationless trading' (see Brown et al, 2005).…”

Section: Discussionmentioning

confidence: 99%

“…Therefore, we should observe for incorrect trades -the buy (sell) before bad (good) announcements -that fund managers subsequently reverse. The disposition literature, beginning with Kahneman and Tversky (1979) and more recently Odean (1998), Frino et al (2004, and Brown et al (2005), suggests that investors are more likely to realize gains than losses. The disposition effect suggests that investors will want to avoid realizing losses in the hope that prices will turn around.…”

Section: Discussionmentioning

confidence: 99%

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Are active fund managers collectors of private information or fast interpreters of public information?

Gallagher

Looi²,

Pinnuck

2010

Accounting & Finance

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Recent studies of fund manager performance find evidence of outperformance. However limited research exists as to whether such outperformance is because of privately collected information, or merely expedient interpretation of publicly released information. In this study, we examine the trade sequences of active Australian equity fund managers around earnings announcements to provide insights into the source of fund managers' superior information. We document an increased occurrence of buy-sell trade sequences around good-news earnings announcements. The evidence is consistent with fund managers having both private information about forthcoming good-news earnings announcements and being 'short-term profiteers'. We find no evidence that fund managers have private information about forthcoming bad-news earnings announcements. However, we do find an increase in the frequency of fund managers not trading before bad-news earnings announcements only to subsequently sell during announcements. Copyright (c) 2010 The Authors. Accounting and Finance (c) 2010 AFAANZ.

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“…According to Weisman, the hedge fund industry is particularly vulnerable to adopting such strategies. In another context, Brown et al (2005) find that Australian equity managers show patterns of trading that seem to be aimed at payoffs with a large downside risk but, nonetheless, an attractive Sharperatio. Siegmann and Lucas (2007) show that even if the Sharpe ratio is replaced by a downside risk measure, short put options remain attractive using statistical performance measures.…”

Section: Introductionmentioning

confidence: 99%

Short-Put Exposures in Hedge Fund Returns: Are They Really There?

Siegmann

Verbeek

2009

SSRN Journal

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Previous studies have shown that systematic risk in hedge fund returns is partly captured by short positions in put option returns. This is suggestive of a potential 'peso problem' in hedge fund returns: a series of steady returns may alternate with an occasional crash. In this paper, we analyze whether equity option-exposures are actually there, and find they are not. Although some hedge fund indices show some exposure to put or call-returns, several robustness analysis as well as an analysis of individual hedge fund returns show that exposures are not consistent with fundamental characteristics of options, such as put-call parity and the positive relation between option prices and volatility.

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Double or Nothing: Patterns of Equity Fund Holdings and Transactions

Cited by 30 publications

References 31 publications

The Use of Derivatives by Investment Managers and Implications for Portfolio Performance and Risk^*

The Use of Derivatives by Investment Managers and Implications for Portfolio Performance and Risk^*

Are active fund managers collectors of private information or fast interpreters of public information?

Short-Put Exposures in Hedge Fund Returns: Are They Really There?

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Double or Nothing: Patterns of Equity Fund Holdings and Transactions

Cited by 30 publications

References 31 publications

The Use of Derivatives by Investment Managers and Implications for Portfolio Performance and Risk*

The Use of Derivatives by Investment Managers and Implications for Portfolio Performance and Risk*

Are active fund managers collectors of private information or fast interpreters of public information?

Short-Put Exposures in Hedge Fund Returns: Are They Really There?

Contact Info

Product

Resources

About

The Use of Derivatives by Investment Managers and Implications for Portfolio Performance and Risk^*

The Use of Derivatives by Investment Managers and Implications for Portfolio Performance and Risk^*