Download this Paper Open PDF in Browser

Pessimistic Fund Managers

35 Pages Posted: 2 Feb 2017 Last revised: 29 Apr 2017

Yongqiang Chu

University of South Carolina - Darla Moore School of Business

Hugh Hoikwang Kim

University of South Carolina, Darla Moore School of Business

Date Written: March 1, 2017

Abstract

This paper exams managers’ sentiment revealed in their letters to shareholders and its relation with their future performance, focusing on closed-end funds (CEFs). The result shows that the pessimistic tone in managers’ letters to shareholders predicts superior future risk-adjusted returns and narrows CEFs’ discount. The result is robust to controlling for potential mean-reversion pattern of investment performance. An increase of pessimistic tone by one standard deviation leads to a 3.6% ~ 5.0% increase of risk-adjusted NAV return per annum. The predictive power is more pronounced when the stock market is expected to be less volatile in the future. Our result suggests that investment managers’ sentiment revealed in accounting disclosure documents might contain useful information for future performance.

Keywords: Managerial Skills, Textual Analysis, Mutual Fund Disclosure, Fund Performance

JEL Classification: M40, G14, G19

Suggested Citation

Chu, Yongqiang and Kim, Hugh Hoikwang, Pessimistic Fund Managers (March 1, 2017). Available at SSRN: https://ssrn.com/abstract=2909208

Yongqiang Chu

University of South Carolina - Darla Moore School of Business ( email )

1014 Greene Street
Columbia, SC 29208
United States
803-777-5960 (Phone)

Hugh Hoikwang Kim (Contact Author)

University of South Carolina, Darla Moore School of Business ( email )

1014 Greene Street
Columbia, SC 29208
United States

Paper statistics

Downloads
74
Rank
277,656
Abstract Views
285