How Does Deleveraging Affect Funding Market Liquidity?

2021 ◽  
Author(s):  
Buhui Qiu ◽  
Gary Gang Tian ◽  
Haijian Zeng
Keyword(s):  
Mutual Funds ◽  
Regression Discontinuity ◽  
Cash Holdings ◽  
Market Liquidity ◽  
Fund Flows ◽  
Chinese Stock Market ◽  
Difference In Differences ◽  
Stock Market Crash ◽  
And Performance ◽  
The Impact

How does deleveraging affect the market liquidity of high-embedded-leverage securities issued by financial institutions and the funding constraints of these institutions? We use the forced deleveraging of structured mutual funds during the 2015 Chinese stock market crash to study the effects of deleveraging. Our regression-discontinuity analysis shows that deleveraging significantly reduces the market liquidity of the deleveraging funds’ equity units. Moreover, our difference-in-differences analysis shows that deleveraging results in large decreases in subsequent fund flows, stock and cash holdings, and performance, with the impact channeled through the deterioration of the market liquidity of the fund’s equity units. This paper was accepted by Victoria Ivashina, finance.

Fund Flow Volatility and Performance

2009 ◽  
Vol 45 (1) ◽  
pp. 223-237 ◽  
Author(s):  
David Rakowski
Keyword(s):  
Mutual Fund ◽  
Negative Relationship ◽  
Fund Flows ◽  
Cross Sectional ◽  
Fund Flow ◽  
Performance Differences ◽  
Significant Negative Relationship ◽  
Equity Funds ◽  
And Performance ◽  
The Impact

AbstractThis paper provides a detailed analysis of the impact of daily mutual fund flow volatility on fund performance. I document a significant negative relationship between the volatility of daily fund flows and cross-sectional differences in risk-adjusted performance. This relationship is driven by domestic equity funds, as well as small funds, well-performing funds, and funds that experience inflows over the sample period. My results are consistent with performance differences arising from the transaction costs of nondiscretionary trading driven by daily fund flows, but not with performance differences arising from the suboptimal cash holdings that arise from fund flows.

scholarly journals Why do Fund Managers Increase the Lottery-Like Characteristics of the Fund?

2021 ◽  
Vol 50 (6) ◽  
pp. 557-592
Author(s):  
Minyeon Han ◽  
Hyoung-goo Kang ◽  
Kyoung Hun Bae
Keyword(s):  
Mutual Funds ◽  
Fund Flows ◽  
Fund Managers ◽  
And Performance

We investigate why fund managers invest in lottery-like stocks and whether the behavior that holds more lottery-like stocks affects performance. First, mutual funds that hold more lottery stocks may attract more fund flows. Our results support the theory that fund managers invest more in lottery-like stocks to reflect investors' preferences for extreme payoffs. Second, the level of lottery-like characteristics of mutual funds does not predict managers’ skill and performance. Therefore, fund managers holding more lottery stocks is not a result of managers’ skills. Third, lottery-like characteristics of mutual funds do not significantly affect performance in specific reporting periods (e.g., year-end or quarter-end). Based on this result, we conclude that fund managers do not invest more in lottery stocks to advance their career.

Cash holding and performance analysis of mutual funds: a case of an emerging financial market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Faisal Khan ◽  
Syed Hamid Ali Shah ◽  
Romana Bangash
Keyword(s):  
Mutual Funds ◽  
Cash Holding ◽  
High Turnover ◽  
Content Type ◽  
Effect Regression ◽  
Agency Issues ◽  
Fama And French ◽  
Run Up ◽  
And Performance ◽  
The Impact

PurposeThis study is about the determinants of cash holding and impact of cash holding on mutual funds’ performance. In addition, the study analyzes the impact of performance-related determinants of cash holding on funds' performance.Design/methodology/approachPanel data of ten years of 190 open-end mutual funds are analyzed through fixed effect regression technique. The risk-adjusted funds' performance of cash based portfolios is computed through capital asset pricing model (CAPM) (1964), Fama and French (1993) and Carhart (1997) models.FindingsThe results indicate that small size funds, high charging front-end load funds, high turnover ratio funds, high 12-month fund returns run up, high dividend paying funds and high redemption level funds hold more cash for precautionary purpose to avoid costs of cash short-falls. Further, monthly average raw returns and risk-adjusted performance of funds with the lowest raw and residual cash holding are found higher than the funds with the highest cash holding. An increase in cash is found to dilute performance.Originality/valueThis is a pioneer study in a corporate environment with shallow capital market, reliance of businesses on bank credit, firms exposed to agency issues, wealth expropriations and existence of business groups with political linkages but with opportunities of investments due to expected favorable geo-socio-political situation. The study generates outcomes relevant for other similar economies.

Book Reviews

2011 ◽  
Vol 49 (3) ◽  
pp. 722-724
Keyword(s):  
Impact Evaluation ◽  
Regression Discontinuity ◽  
Harvard University ◽  
Regression Discontinuity Design ◽  
Selection Methods ◽  
Evaluation Design ◽  
Difference In Differences ◽  
The Impact ◽  
Combining Methods

Rema Hanna of John F. Kennedy School of Government, Harvard University reviews “Impact Evaluation in Practice” by Paul J. Gertler, Sebastian Martinez, Patrick Premand, Laura B. Rawlings, and Christel M. J. Vermeersch. The EconLit Abstract of the reviewed work begins “Presents an introduction to the topic of impact evaluation and its practice in development. Discusses why impact evaluation is important; determining evaluation questions; causal inference and counterfactuals; randomized selection methods; regression discontinuity design; difference-in-differences; matching; combining methods; evaluating multifaceted programs; operationalizing the impact evaluation design; choosing the sample; collecting data; and producing and disseminating findings. Glossary; index.”

Liquidity versus Wealth in Household Debt Obligations: Evidence from Housing Policy in the Great Recession

2020 ◽  
Vol 110 (10) ◽  
pp. 3100-3138 ◽  
Author(s):  
Peter Ganong ◽  
Pascal Noel
Keyword(s):  
Housing Policy ◽  
Great Recession ◽  
Regression Discontinuity ◽  
Short Term ◽  
Difference In Differences ◽  
The Great Recession ◽  
Consumption Decisions ◽  
Research Designs ◽  
The Impact

We exploit variation in mortgage modifications to disentangle the impact of reducing long-term obligations with no change in short-term payments (“wealth”), and reducing short-term payments with no change in long-term obligations (“liquidity”). Using regression discontinuity and difference-in-differences research designs with administrative data measuring default and consumption, we find that principal reductions that increase wealth without affecting liquidity have no effect, while maturity extensions that increase only liquidity have large effects. This suggests that liquidity drives default and consumption decisions for borrowers in our sample and that distressed debt restructurings can be redesigned with substantial gains to borrowers, lenders, and taxpayers. (JEL E21, G21, G51, R38)

Behavior of investor flows in Israeli provident funds

2019 ◽  
Vol 16 (3) ◽  
pp. 334-356
Author(s):  
Ofer Arbaa ◽  
Eva Varon
Keyword(s):  
Poor Performance ◽  
Fixed Effect ◽  
Fund Flows ◽  
Past Performance ◽  
Content Type ◽  
Fund Managers ◽  
The Usa ◽  
And Performance ◽  
The Impact ◽  
Provident Fund

Purpose The purpose of this paper is to study the sensitivity of provident fund investors to past performance and how market conditions, changes in risk and liquidity levels influence the net flows into provident funds by using a unique sample from Israel. Design/methodology/approach The study checks the impact of different levels of fund performance on provident fund flows using three alternative proxies for performance: raw return and the risk adjusted returns based on the Sharpe ratio and the Jensen’s α. The analysis relies on the time fixed effect and fund fixed effect regression models. Findings Results reveal that there exists an approximately concave flow–performance relationship and performance persistence among Israeli provident funds. Israeli provident fund investors are risk averse so they overreact to bad performance both in bull and bear markets. Moreover, liquidity is an important factor to influence the flow–performance curve. The investors’ strong negative response to poor performance and relative insensitivity to outperformance show that provident fund managers are not rewarded for their risk-shifting activities as in mutual funds. Originality/value The authors explore the behavior of investor flows in non-institutional retirement savings funds specifically outside of the USA, which is a topic not properly investigated in literature. Moreover, examining inflows and outflows separately gives the authors a richer understanding of investors in pension schemes. This study also enhances the understanding of the impact of fund liquidity on the flow–performance relationship for the retirement funds segment.

scholarly journals Analiza wpływu wybranych czynników na popyt na usługę zarządzania funduszem inwestycyjnym

Ekonomia ◽  
2018 ◽  
Vol 24 (2) ◽  
pp. 23-38
Author(s):  
Adam Łukojć ◽  
Iwona Białomazur
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Financial Statements ◽  
Fund Flows ◽  
Fund Management ◽  
Investment Performance ◽  
Main Factors ◽  
Mutual Fund Flows ◽  
Fund Size ◽  
The Impact

Analysis of the impact of selected determinants on the demand for mutual fund management servicesThe authors try to identify the main factors impacting the value of inflows to mutual funds in Poland. The inflows to mutual funds are compared to the following data: costs total expense ratios, investment performance in the current and previous year, and fund size. The data was collected from 451 financial statements of Polish mutual funds, for the years 2012–2016. The funds belong to three categories: bond, equity, small, and mid cap equity. The findings suggest that the connection between the funds fees — the price — and inflows to funds is relatively weak. Investment performance in the same year is the only factor that shows significant correlation with mutual fund flows.

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