Superstar Fund Managers: Talent Revelation or Just Glamor?

43 Pages Posted: 15 Feb 2016 Last revised: 5 Oct 2017

Jerry T. Parwada

UNSW Australia Business School, School of Banking and Finance; UNSW Business School; Financial Research Network (FIRN)

Eric K. M. Tan

University of Queensland - Business School

Date Written: February 14, 2016

Abstract

We examine the effect of mutual fund managers’ superstar status on their money flows, performance, and risk-taking behavior. Investors respond positively to fund managers who win a prominent fund-manager-of-the-year award based on proven long-term record. While award-winning managers generate positive risk-adjusted performance diseconomies of scale apparently diminish such outperformance. Award-winning managers do not take on increased risks or trade more actively as implied by attention-induced incentives. Our results are consistent with Berk and van Binsbergen’s (2015, 2017) rational expectations equilibrium argument that skill exists among superstar fund managers and the attendant inflow of investor capital subsequently arbitrages away such outperformance.

Keywords: Keywords: Mutual funds, Fund manager awards, Fund flows, Performance, Risk taking

JEL Classification: G23, G28

Suggested Citation

Parwada, Jerry T. and Tan, Eric K. M., Superstar Fund Managers: Talent Revelation or Just Glamor? (February 14, 2016). 29th Australasian Finance and Banking Conference 2016; 8th Conference on Financial Markets and Corporate Governance (FMCG) 2017; Asian Finance Association (AsianFA) 2017 Conference. Available at SSRN: https://ssrn.com/abstract=2732363 or http://dx.doi.org/10.2139/ssrn.2732363

Jerry T. Parwada

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

UNSW Business School ( email )

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

UNSW
Sydney, NSW 2052
Australia

HOME PAGE: http://www.firn.org.au

Eric K. M. Tan (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Register to save articles to
your library

Register

Paper statistics

Downloads
286
rank
98,567
Abstract Views
1,134
PlumX