Abstract

https://ssrn.com/abstract=2023805
 
 

Citations (1)



 


 



Strategic Mutual Fund Tournaments


Joseph Chen


University of California, Davis - Graduate School of Management

Eric N. Hughson


Claremont Colleges - Robert Day School of Economics and Finance

Neal Stoughton


Vienna University of Economics and Business; Vienna Graduate School of Finance (VGSF)

September 1, 2016


Abstract:     
This paper characterizes the optimal risk-taking strategies of mutual fund managers competing in a multi-period winner-take-all tournament. With both multiple periods and competition between more than two managers, we show that in the final period all managers take maximum risk with the possible exception of the leading fund, who plays a “lock-in” strategy. In the initial period, all funds take maximum risk. Our prediction is contrary to the standard result since it implies risk reduction by the leader instead of increasing risk by the trailers. We find empirical evidence that supports our theory, which are robust to various risk specifications.

Number of Pages in PDF File: 52

Keywords: tournaments, mutual funds, risk

JEL Classification: G23, G11


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Date posted: March 17, 2012 ; Last revised: October 18, 2016

Suggested Citation

Chen, Joseph and Hughson, Eric N. and Stoughton, Neal, Strategic Mutual Fund Tournaments (September 1, 2016). Available at SSRN: https://ssrn.com/abstract=2023805 or http://dx.doi.org/10.2139/ssrn.2023805

Contact Information

Joseph S. Chen
University of California, Davis - Graduate School of Management ( email )
One Shields Avenue
Davis, CA 95616
United States
(530) 752-7155 (Phone)
(530) 752-2924 (Fax)

Eric N. Hughson
Claremont Colleges - Robert Day School of Economics and Finance ( email )
500 E. Ninth St.
Claremont, CA 91711-6420
United States
909-607-3664 (Phone)

Neal M. Stoughton (Contact Author)
Vienna University of Economics and Business ( email )
Austria

Vienna Graduate School of Finance (VGSF) ( email )
Austria
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