Risk-taking behavior in mutual fund tournaments

Taylor, Jasmine

doi:10.1016/s0167-2681(02)00028-8

Cited by 150 publications

(105 citation statements)

References 11 publications

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“…indicates that top ranking funds in the large families take more risk than bottom ranked ones, which is consistent with the theoretical prediction of strategic tournament by Taylor (2003). This result is also consistent when the cut-off point of the ranking period turns to be 7 months in the second column of Panel A.…”

Section: A Risk Taking In the Segment And Family Tournamentssupporting

confidence: 85%

Fund Family Tournament and Performance Consequences: Evidence from the UK fund industry

Zhang¹,

Li²,

Zhou³

et al. 2014

MFJ

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(2014) 'Fund family tournament and performance consequences : evidence from the UK fund industry.', Multinational nance journal., 18 (1/2). pp. 43-84. Further information on publisher's website:http://www.mfsociety.org/modules/modDashboard/uploadFiles/journals/googleScholar/862.html Publisher's copyright statement:Additional information: Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. Yaoyao Fu Durham University , UKBy applying tournament analysis to the UK Unit Trusts data, the results support significant risk shifting in the family tournament; i.e. interim winning managers tend to increase their level of risk exposure more than losing managers. It also shows that the risk-adjusted returns of the winners outperform those of the losers following the risk taking, which implies that risk altering can be regarded as an indication of managers' superior ability. However, the tournament behaviour can still be a costly strategy for investors, since winners can be seen to beat losers in the observed returns due to the deterioration in the performance of their major portfolio holdings. (JEL: G20, G23)

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Section: A Risk Taking In the Segment And Family Tournamentssupporting

confidence: 85%

Fund Family Tournament and Performance Consequences: Evidence from the UK fund industry

Zhang¹,

Li²,

Zhou³

et al. 2014

MFJ

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“…34 However, there are also theoretical and empirical papers that show that fund managers might actually increase risk in response to good past performance under some circumstances (see Taylor, 2003;Basak and Makarov, 2010;Kempf et al, 2009). Irrespective of the direction of their risk change, funds with past top performance would show a higher turnover ratio if they have to buy and sell stocks in order to adjust risk.…”

Section: Strategy Changementioning

confidence: 99%

Overconfidence Among Professional Investors: Evidence from Mutual Fund Managers

Pütz

Ruenzi²

2010

SSRN Journal

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“…In the models by Gaba and Kalra (1999), Hvide and Kristiansen (2003) and Taylor (2003), players can solely decide on risk taking in the tournament; hence there is no effort effect and no possible linkage with the likelihood effect. Other papers analyze risk taking empirically.…”

Section: Introductionmentioning

confidence: 99%

Optimal risk taking in an uneven tournament game with risk averse players

Kräkel

2008

Journal of Mathematical Economics

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We analyze the optimal choice of risk in a two-stage tournament game between two players that have different concave utility functions. At the first stage, both players simultaneously choose risk. At the second stage, both observe overall risk and simultaneously decide on effort or investment. The results show that those two effects which mainly determine risk taking -an effort effect and a likelihood effect -are strictly interrelated. This finding sharply contrasts with existing results on risk taking in tournament games with symmetric equilibrium efforts where such linkage can never arise. Hence, previous findings based on symmetry at the effort stage turn out to be nongeneric.

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Risk-taking behavior in mutual fund tournaments

Cited by 150 publications

References 11 publications

Fund Family Tournament and Performance Consequences: Evidence from the UK fund industry

Fund Family Tournament and Performance Consequences: Evidence from the UK fund industry

Overconfidence Among Professional Investors: Evidence from Mutual Fund Managers

Optimal risk taking in an uneven tournament game with risk averse players

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