Should Investors Invest in Hedge Fund-Like Mutual Funds? Evidence from the 2007 Financial Crisis

2010 ◽  
Author(s):  
Jing-Zhi Huang ◽  
Ying Wang
Keyword(s):  
Financial Crisis ◽  
Mutual Funds ◽  
Hedge Fund

scholarly journals Relationship between mutual funds and hedge funds performance in different periods

2018 ◽  
Vol 4 (1) ◽  
pp. 1-14
Author(s):  
G. Lechner ◽  
B. Fauster
Keyword(s):  
Financial Crisis ◽  
Correlation Analysis ◽  
Mutual Funds ◽  
Hedge Funds ◽  
Hedge Fund ◽  
Herding Behavior ◽  
Changing Environment ◽  
Price Informativeness ◽  
Developed Markets

The hedge fund literature has already shown that hedge funds and mutual funds follow a different strategy. One result of the literature was that mutual funds herd into or out of stocks following the herd of hedge funds one quarter later. The aim of this paper is to find out whether herding behavior of mutual funds have changed after the financial crisis. Our paper compares mutual funds and equity hedge funds in general (not only large hedge funds). The hypothesis is that mutual funds are not herding to equity hedge funds as strong as before the crisis. We use OLS regressions and correlation analysis to test the aforementioned hypothesis. We found that the monthly returns of hedge funds and mutual funds have synchronized in developed markets after the financial crisis. Therefore, the argument that mutual funds herd hedge funds is at least not as strong as before. The improving effectiveness and price informativeness could be an explanation for this changing environment.

What Constrains Liquidity Provision? Evidence from Institutional Trades*

2020 ◽  
Author(s):  
Efe Çötelioğlu ◽  
Francesco Franzoni ◽  
Alberto Plazzi
Keyword(s):  
Financial Crisis ◽  
Mutual Funds ◽  
Hedge Funds ◽  
Mutual Fund ◽  
Hedge Fund ◽  
Past Performance ◽  
Stock Level ◽  
Liquidity Provision ◽  
Financial Conditions ◽  
Level Data

Abstract The article studies liquidity provision by institutional investors using trade-level data. We find that hedge fund trades are a more important predictor of stock-level liquidity than mutual fund trades. However, hedge funds’ liquidity provision is more exposed to financial conditions than that of mutual funds. Hedge funds that are more constrained in terms of leverage, age, asset illiquidity, and past performance exhibit a stronger shift toward liquidity consumption when funding condition tighten. Stocks with more exposure to constrained liquidity providing hedge funds suffered more during the financial crisis.

Hedge Fund Stock Trading in the Financial Crisis of 2007–2009

2011 ◽  
Vol 25 (1) ◽  
pp. 1-54 ◽  
Author(s):  
Itzhak Ben-David ◽  
Francesco Franzoni ◽  
Rabih Moussawi
Keyword(s):  
Financial Crisis ◽  
Hedge Fund ◽  
Stock Trading

Style and Skill: Hedge Funds, Mutual Funds, and Momentum

2020 ◽  
Vol 66 (12) ◽  
pp. 5505-5531 ◽  
Author(s):  
Mark Grinblatt ◽  
Gergana Jostova ◽  
Lubomir Petrasek ◽  
Alexander Philipov
Keyword(s):  
Mutual Funds ◽  
Hedge Funds ◽  
Mutual Fund ◽  
Hedge Fund ◽  
Fund Performance ◽  
Short Sales ◽  
Fund Managers ◽  
Liquidity Provision ◽  
Stock Picking ◽  
Hedge Fund Performance

Classifying mandatory 13F stockholding filings by manager type reveals that hedge fund strategies are mostly contrarian, and mutual fund strategies are largely trend following. The only institutional performers—the two thirds of hedge fund managers that are contrarian—earn alpha of 2.4% per year. Contrarian hedge fund managers tend to trade profitably with all other manager types, especially when purchasing stocks from momentum-oriented hedge and mutual fund managers. Superior contrarian hedge fund performance exhibits persistence and stems from stock-picking ability rather than liquidity provision. Aggregate short sales further support these conclusions about the style and skill of various fund manager types. This paper was accepted by Tyler Shumway, finance.

scholarly journals Hedge Funds for Retail Investors? An Examination of Hedged Mutual Funds

2009 ◽  
Vol 44 (2) ◽  
pp. 273-305 ◽  
Author(s):  
Vikas Agarwal ◽  
Nicole M. Boyson ◽  
Narayan Y. Naik
Keyword(s):  
Mutual Funds ◽  
Hedge Funds ◽  
Rapid Growth ◽  
Lower Cost ◽  
Hedge Fund ◽  
Trading Strategies ◽  
Superior Performance ◽  
Retail Investors

AbstractRecently, there has been rapid growth in the assets managed by “hedged mutual funds”—mutual funds mimicking hedge fund strategies. We examine the performance of these funds relative to hedge funds and traditional mutual funds. Despite using similar trading strategies, hedged mutual funds underperform hedge funds. We attribute this finding to hedge funds’ lighter regulation and better incentives. Conversely, hedged mutual funds outperform traditional mutual funds. Notably, this superior performance is driven by managers with experience implementing hedge fund strategies. Our findings have implications for investors seeking hedge-fund-like payoffs at a lower cost and within the comfort of a regulated environment.

Corporate Social Responsibility Exposure and Performance of Mutual Funds

2019 ◽  
Keyword(s):  
Corporate Social Responsibility ◽  
Financial Crisis ◽  
Social Responsibility ◽  
Mutual Funds ◽  
Stock Return ◽  
Fund Performance ◽  
A Value ◽  
Performance Patterns ◽  
And Performance ◽  
Corporate Social

The authors study the performance consequences of exposure to corporate social responsibility (CSR) through stock holdings for mutual funds. Using a large sample of US domestic mutual funds, they find that funds overweighting low-CSR stocks outperform funds underweighting them by 1.7% to 2.6% annually. This outperformance, however, reverses during the 2008-2009 financial crisis. They also find similar performance patterns among stocks. An equal-weighted high-minus-low CSR stock return spread can explain the CSR-based fund performance spread, whereas a value-weighted spread cannot. These results are consistent with the interpretation that low-CSR funds overweight low-CSR small-cap stocks that offer high returns to investors who are averse to low-CSR investments. Investors tend to avoid low-CSR stocks due to either social norms against these stocks or risk of underperformance of these investments when overall trust in corporations suffers a negative shock (such as during a financial crisis).

scholarly journals Mutual funds' exits, financial crisis and Darwin

2020 ◽  
Vol 65 ◽  
pp. 101738
Author(s):  
Anna (Ania) Zalewska ◽  
Yue Zhang
Keyword(s):  
Financial Crisis ◽  
Mutual Funds
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