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Abstract:
Using stocks from a wide range of industry sectors on the Australian Securities Exchange, this paper examines the conditional distribution of intra-day stock prices and predicts the direction of the next price change in an ordered-probit-GARCH framework that accounts for the discreteness of prices. The analysis also incorporates the endogeneity of the time between trades in an ACD framework. Other elements considered include depth, trade imbalance, and volume. The results show that trade imbalance has a positive effect on the probability of price change. Durations have a negative effect. In-sample and out-of-sample forecasting analyses reveal that in 71% of the cases the system successfully predicts the direction of the subsequent price change.

Stock prices, Ordered probit, Autoregressive Conditional Duration, Trade imbalance

Abstract:
We examine the impact of several factors on the selection of portfolio managers for Australian pension plan mandates. Performance measures do not affect the probability of a mandate allocation. Pension sponsors tend to choose managers with top-quartile five-year performance who have recently beaten a market benchmark. Management expenses have a negative impact on a manager's chances. A surprising result is sponsors' tolerance for high portfolio trading costs. Mandates are spread across manager investment styles. The style and institutional attributes of preferred managers suggest trustees' reputation and prudential concerns matter, particularly for the aggregate annual mandate allocations.

Pension plan mandates, fund managers, delegated portfolio management.

Abstract:
This paper examines mutual fund investors' response to mergers of Australian mutual fund companies. Findings from two matching-control techniques employed to analyse the impact of mergers on excess money in and out of open and closed funds involved in the transactions suggest that mergers are not accompanied by increased money flows. Instead investors withdraw from the target funds prior to and after the merger. Cross-sectional analyses show that funds belonging to specialist mutual fund companies record more gains in assets under management than declines following mergers, and that money inflow gains at competing funds induce reductions of management expense ratios at target funds.

Mutual funds, Investor behaviour, Mergers and acquisitions

Abstract:
This study examines how the termination of superannuation investment mandates contributes to the departure of top fund managers in companies delegated the portfolio management role. Terminations of superannuation plan mandates increase the probability of a fund company changing the responsible fund manager. Objective-adjusted returns are also significant managerial turnover considerations. These results illustrate that significant losses of superannuation fund clients act as an external control mechanism in the investment management industry that complements internal managerial performance measures.

Abstract:
This study examines how the termination of superannuation investment mandates contributes to the departure of top fund managers in companies delegated the portfolio management role. Terminations of superannuation plan mandates increase the probability of a fund company changing the responsible fund manager. Objective-adjusted returns are also significant managerial turnover considerations. These results illustrate that significant losses of superannuation fund clients act as an external control mechanism in the investment management industry that complements internal managerial performance measures.

Fund Flows, Pension Plan Mandates, Performance, Manager Termination

Abstract:
This study investigates the alleged disintermediation of banks' traditional deposit-taking in favour of investment management activities. Using data on Australian bank-affiliated funds and a nine-year record of the parent banks' liability balances, this study finds that managed funds do not displace bank liabilities. Prudential capital adequacy requirements dissuade banks from using in-house managed investments as indirect conduits for raising funds in the same manner as deposit-taking.

Abstract:
This study investigates the alleged disintermediation of banks' traditional deposit-taking in favour of investment management activities. Using data on Australian bank-affiliated funds and a nine-year record of the parent banks' liability balances, this study finds that managed funds do not displace bank liabilities. Prudential capital adequacy requirements dissuade banks from using in-house managed investments as indirect conduits for raising funds in the same manner as deposit-taking.

Bank deposits; Managed funds; Disintermediation

Abstract:
This paper presents new evidence on the origins of investment management companies. Specifically, we examine the characteristics and nature of those "parent" fund companies from which at least one of their key fund manager personnel departed to establish their own independent firms. Covering the period 1980 and 2003, we create a unique hand-collected database of money management firm founders and their "parents." We find that larger, more reputable and more diversified firms with a significant presence in growth-oriented investment objectives are more likely to produce start-ups. Coming from larger companies increases the time it takes for a start-up to attain significant assets under management. Fund managers with experience in more diversified firms and those that are dominated by growth funds experience shorter time to "significant" assets. Locating a start-up geographically closer to a founder's previous employer results in a faster time to market. An analysis of the similarities between parent and start-ups' stock holdings shows that there is almost double the commonality of stocks held, than previously documented for competing mutual funds. The main driver of commonality in stock selection is the number of founders coming from a single parent firm.

Investment management firms, Fund manager background, Entrepreneurial activities

Abstract:
Fund managers' bias towards geographically proximate securities is a well-researched phenomenon, yet the origins of their location choices have received little empirical scrutiny. This paper traces the employment and geographic heritage of 358 entrepreneurial fund managers and analyzes the determinants of where they locate their firms and stock selections. The evidence suggests start-ups tend to be based close to the origins of their founders, and in regions with more investment management firms, banking establishments, and large institutional money managers. New money managers show a strong local bias in their equity holdings, three times the levels previously documented for mutual funds. The propensity to invest closer home correlates strongly with the presence of sub-advisory opportunities from institutional investors in the vicinity. While home bias levels between managers who relocate with their start-ups and the rest of the entrepreneurs are similar, preferences for stocks that were formally local persist.

Abstract:
The rapid growth of pension systems raises the specter of market disruptions from pension plan flows. In particular, appointments and changes of fund managers by pension trustees are accompanied by large intermittent portfolio flows, mostly channeled via the upstairs market. In this article we use pension plan mandate awards and terminations and stock trades initiated by delegated portfolio managers to investigate the stock market impact of shocks resulting from the flow of money from the retirement sector on the main market. Mandate decisions reduce the probability of observing trades. Mandate awards are associated with reduced market impact costs. There is evidence of price pressure from mandate-associated flows.

Pension plan mandates, fund managers, execution probability, market impact, stock prices

Abstract:
Do market comovements affect international portfolio investment? We examine whether there are systematic changes made to the holdings of equities listed on U.S. stock exchanges by foreign fund managers when their home markets become more correlated with the U.S. We concentrate on international equity mutual fund managers based in 41 countries. We find that foreign fund managers increase their holdings of U.S. stocks post structural breaks in the return comovements between their home markets and the U.S. equity market. Our results are robust to various controls for the determinants of cross-border asset flows associated with information asymmetry.

Stock market comovement, international portfolio holdings, diversification

Abstract:
We examine whether bank bailout programs initiated in seven countries during the 2007-2009 global financial crisis reduced counterparty risk in the financial system using the hedge fund industry as a laboratory. Hedge funds have extensive and economically significant ties to banking institutions and these links spurred fears of systemic risk among regulators and investors. We find that the rescue of financial institutions offering prime brokerage, custodial and investment advisory services to hedge funds was followed in the short term (up to six months) by reduced probability of hedge fund liquidation. However, only the rescue of custodians reduced hedge fund illiquidity or the ability of funds to meet clients’ redemption requests.

Bailouts, counterparty risk, hedge funds, terminations, liquidity

Abstract:
Do political preferences influence the portfolio decisions of money managers? Previous research demonstrates that policy platforms are capitalized into equity prices. However, the literature stops short of inquiring how real world investors select securities in response to political developments. This paper asks whether money managers’ portfolio decisions are affected by political considerations during the 2000 United States Presidential Election. Institutional investors overweight on Bush stocks if they are Republican and on Gore stocks if they are Democratic oriented. During the presidential election cycle, politically motivated trades outperform non-political trades.

Money managers, political preferences, stock selection

Abstract:
Do political preferences influence the portfolio decisions of money managers? Previous research demonstrates that policy platforms are capitalized into equity prices. However, the literature stops short of inquiring how real world investors select securities in response to political developments. This paper asks whether money managers' portfolio decisions are affected by political considerations during the 2000 United States Presidential Election. Institutional investors overweight on Bush stocks if they are Republican and on Gore stocks if they are Democratic oriented. Politically motivated trades outperform non-political trades.

Presidential electiuons, Campaign contributions, Money managers, Portfolio preferences, Stock trades

Abstract:
Investors seeking exposure to global equity markets commonly buy international mutual funds managed by locally based fund managers. How competitive is this form of intermediated investing? We investigate whether international equity fund managers mimic each other's portfolio holdings and analyze the performance implications of these actions. Managers based in the same country have more stocks held in common than those of their peers in other countries. Correlated trading among domestic fund managers contributes significantly to this pattern. Cross-border managers' portfolio holdings and trades are also relevant to the actions of domestic managers. Stock selection strategies based on mimicry and differentiation both deliver short-term superior performance. Mimicked sales occur while prices are rising.

International mutual funds, information diffusion, performance

Abstract:
The present paper examines the often-overlooked managed fund fee that is incurred when investors enter and exit managed fund products. The present paper documents that transaction costs for investors, measured by the application-redemption spread, are above stock market brokerage rates although they have declined since 1995. The study analyses the relationship between this transaction fee and several variables. In summary, retail fund transaction costs are positively related to retail funds' assets under management, whilst this relationship is negative for larger wholesale funds, consistent with economies of scale. Direct entry and exit fees and initial commissions are positively related to transaction costs which raises the possibility that the commissions are used to levy soft-dollar payments. The paper also documents a relationship between transaction costs and fund flows which differs between retail and wholesale funds. Overall, the findings are consistent with the proposition that the various fees are used by managers as interchangeable and the different fee regimes reflect different products and markets.

Abstract:
We examine the information content of managed fund ratings for Australian retail investors. Because fund ratings, premised on a quantitative-qualitative model, are highly transitory, we question whether investors formulate their investment decisions with respect to changes in ratings and whether ratings, in turn, react to fund flows. We find that information regarding fund flows can be obtained from ratings, and that rating changes can have far-reaching effects. Investors flock to newly upgraded funds while they penalize those that have been downgraded by withdrawing funds. Investors are constantly anticipating ratings revisions, particularly downgrades, and we attribute this phenomenon to the role of qualitative factors in the ratings.