Mutual Funds Essay

We argue that managers with different types of information will invest differently.

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Do changes in the structure of the network of mutual funds signal the presence of herd behavior?

In the first essay of this dissertation we argue that performance is also explained by other features of the funds related to informational linkages.

Chapter 2 analyses the impact of competition in financial markets on incentives to re- veal information.

It finds that discretionary portfolio disclosure and advertising expenses of mutual funds decrease with competition.

Do the characteristics of the mutual fund network help to explain the performance of mutual funds?

Mutual Funds Essay

Is the position of a mutual fund in the network related to persistence of abnormal performance of the fund?However, when those linkages remain from one period to another, we can consider that the returns of the funds are not correlated by chance and we expect to find persistence.Finally, we consider how correlation across funds can help to explain herd behavior in the mutual fund industry.This thesis contains three essays on delegated portfolio management and deals with issues such as impact of regulations on mutual fund performance, impact of competition on transparency in financial markets and strategic trading behaviour of agents in illiquid markets. mutual funds to disclose their portfolio holdings on a quarterly basis from semi-annual previously.Chapter 1 analyses the impact of more frequent portfolio disclosure on mutual funds performance. This change in regulation provides a natural setting to study the impact of disclosure frequency on the performance of mutual funds.If there are informational linkages, those connections could help to test for persistence.Then, we expect that the returns of those funds will be correlated to each other; if the returns of those funds were correlated by luck, it is expected that in the next period, those linkages will disappear.Prior to the policy change, it finds that the semi-annual funds with high abnormal returns in the past year outperform the corresponding quarterly funds by 17-20 basis points a month.This difference in performance disappears after 2004.This supports the theory that mutual funds use portfolio disclosure and advertising as marketing tools to attract new investments in a financial market, where superior relative performance and greater visibility are rewarded with convex payoffs.With higher competition, the likelihood of landing new investments goes down for each fund while the cost of disclosure goes up.


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