Essays on Information Asymmetry, Active Management, and Performance
type: CreativeWork
description: Agency theory suggests that information asymmetry between mutual fund managers and mutual fund investors can be mitigated if managers are compensated for the private information that influences mutual fund risk and performance. This study investigates the role of active management in influencing returns and return volatility of mutual funds. Chapter 1 investigates whether real estate mutual funds (REMFs) outperform Carhart’s (1997) four-factor and index benchmarks using daily return data from the CRSP survivorship bias-free mutual fund database from September 1998 to December 2013. We employ generalized autoregressive conditionally heteroscedastic (GARCH) volatility models to estimate more precise alphas than those generated in the extant studies. We document that risk-adjusted alphas of actively managed REMFs are statistically and economically significant, reflecting the informational advantage and skills of active managers. We also show that actively managed REMFs outperform the real estate index benchmark (Ziman Real Estate Index) and generate a yearly buy-and-hold abnormal return of 3.64%. Active management, therefore, provides value beyond the diversification benefits that can be generated by investing into the real estate index. While active managers of REMFs generate abnormal returns (gross of expenses), they capture the entire amount themselves, sharing none with investors (net of expenses). Accordingly, the average abnormal return to investors is close to zero due to expenses associated with REMFs, such as management fees, 12b-1 fees, waivers, and reimbursements. Finally, we find that passively managed REMFs do not generate abnormal risk-adjusted alphas in Carhart’s (1997) four-factor model. Chapter 2 examines managed volatility mutual funds (MVMFs) that utilize a range of investment strategies focused on portfolio volatility. These funds have increased in popularity in the wake of the financial crisis (December 2007 to June 2009) which introduced considera…
abstract: Agency theory suggests that information asymmetry between mutual fund managers and mutual fund investors can be mitigated if managers are compensated for the private information that influences mutual fund risk and performance. This study investigates the role of active management in influencing returns and return volatility of mutual funds. Chapter 1 investigates whether real estate mutual funds (REMFs) outperform Carhart’s (1997) four-factor and index benchmarks using daily return data from the CRSP survivorship bias-free mutual fund database from September 1998 to December 2013. We employ generalized autoregressive conditionally heteroscedastic (GARCH) volatility models to estimate more precise alphas than those generated in the extant studies. We document that risk-adjusted alphas of actively managed REMFs are statistically and economically significant, reflecting the informational advantage and skills of active managers. We also show that actively managed REMFs outperform the real estate index benchmark (Ziman Real Estate Index) and generate a yearly buy-and-hold abnormal return of 3.64%. Active management, therefore, provides value beyond the diversification benefits that can be generated by investing into the real estate index. While active managers of REMFs generate abnormal returns (gross of expenses), they capture the entire amount themselves, sharing none with investors (net of expenses). Accordingly, the average abnormal return to investors is close to zero due to expenses associated with REMFs, such as management fees, 12b-1 fees, waivers, and reimbursements. Finally, we find that passively managed REMFs do not generate abnormal risk-adjusted alphas in Carhart’s (1997) four-factor model. Chapter 2 examines managed volatility mutual funds (MVMFs) that utilize a range of investment strategies focused on portfolio volatility. These funds have increased in popularity in the wake of the financial crisis (December 2007 to June 2009) which introduced considera…
author: Stetsyuk, Ivan
language: eng
keywords: Finance, Egarch, Managed volatility, Mutual fund, Real estate, Recession, Return volatility
license: http://rightsstatements.org/vocab/InC/1.0/
date published: 2016
date modified: 2026-07-27T21:20:39Z
provider: Temple University
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: Temple University. Libraries

PropertyValue
property ID: Handle
value: http://hdl.handle.net/20.500.12613/2462