Mutual Fund Tournaments and Fund Active Share

43 Pages Posted: 27 Nov 2017 Last revised: 17 Jun 2020

See all articles by C. Wei Li

C. Wei Li

University of Iowa

Ashish Tiwari

University of Iowa

Lin Tong

Fordham University - Finance Area

Date Written: June 11, 2020

Abstract

We study the impact of the tournament-like competition in the mutual fund industry by examining the Active Share choices of funds. Funds with relatively poor performance by the end of the third quarter in a calendar year tend to increase their Active Share during the last quarter. The increase in the trailing funds' Active Share is accompanied by an increase in the funds' downside risk exposure. The evidence suggests that the strategic shifts in Active Share we document are not information/skill motivated.

Keywords: Mutual Fund Tournaments, Active Share, Downside Risk, Implicit Incentives, Performance Chasing

Suggested Citation

Li, C. Wei and Tiwari, Ashish and Tong, Lin, Mutual Fund Tournaments and Fund Active Share (June 11, 2020). Available at SSRN: https://ssrn.com/abstract=3074720 or http://dx.doi.org/10.2139/ssrn.3074720

C. Wei Li

University of Iowa ( email )

Finance Department
Henry B. Tippie College of Business
Iowa City, IA 52242-1097
United States
319-335-0911 (Phone)
3193353690 (Fax)

Ashish Tiwari

University of Iowa ( email )

Finance Department
Henry B. Tippie College of Business, 108 PBB
Iowa City, IA 52242
United States
(319) 353-2185 (Phone)
(319) 335-3690 (Fax)

HOME PAGE: https://tippie.uiowa.edu/people/ashish-tiwari

Lin Tong (Contact Author)

Fordham University - Finance Area ( email )

33 West 60th Street
New York, NY 10023
United States

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