Concave Payoff Patterns in Equity Fund Holdings and Transactions
29 Pages Posted: 14 Mar 2006
Date Written: September 11, 2006
Abstract
Recent results from the hedge fund literature provide evidence that option-based risk factors may be a significant factor in managed fund returns. By examining a unique database of high-frequency holdings and transactions from a representative sample of forty Australian equity funds we find that exposure to these option-based risk factors may well arise from trading activity rather than from derivative positions that generate similar payouts. While the resulting concave payout patterns are associated with large and significant alphas in our sample, these alphas may be more a compensation for a modest increase in tail risk exposure than they are a reward for information-based trading.
Keywords: Performance measurement, market timing measures, disposition effect, overlay strategies
JEL Classification: G23
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Paper statistics
Recommended Papers
-
Risk Taking by Mutual Funds as a Response to Incentives
By Judith A. Chevalier and Glenn Ellison
-
Mutual Fund Flows and Performance in Rational Markets
By Richard C. Green and Jonathan Berk
-
Mutual Fund Flows and Performance in Rational Markets
By Richard C. Green and Jonathan Berk
-
Career Concerns of Mutual Fund Managers
By Judith A. Chevalier and Glenn Ellison
-
Career Concerns of Mutual Fund Managers
By Judith A. Chevalier and Glenn Ellison
-
The Persistence of Risk-Adjusted Mutual Fund Performance
By Edwin J. Elton, Martin J. Gruber, ...
-
By Judith A. Chevalier and Glenn Ellison
-
Hot Hands in Mutual Funds: the Persistence of Performance, 1974-87
By Darryll Hendricks, Jayendu Patel, ...
-
By Narasimhan Jegadeesh, Hsiu-lang Chen, ...