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Fund family tournament and performance consequences: evidence from the UK fund industry

Fund family tournament and performance consequences: evidence from the UK fund industry
Fund family tournament and performance consequences: evidence from the UK fund industry
By applying tournament analysis to the UK Unit Trusts data, the results support significant risk shifting in the family tournament; i.e. interim winning managers tend to increase their level of risk exposure more than losing managers. It also shows that the risk-adjusted returns of the winners outperform those of the losers following the risk taking, which implies that risk altering can be regarded as an indication of managers’ superior ability. However, the tournament behaviour can still be a costly strategy for investors, since winners can be seen to beat losers in the observed returns due to the deterioration in the performance of their major portfolio holdings.
1096-1879
43-84
Zhang, Zhichao
7a646262-463c-4035-b69b-beb5586b3209
Li, Ding
83b05179-aa88-4a71-b298-5c97a3f0cdda
Zhou, Si
4d888ef9-73bb-4fde-969e-5003c5c0b146
Fu, Yaoyao
32bae389-e7f1-4fbc-9544-a115cfbc3a3b
Zhang, Zhichao
7a646262-463c-4035-b69b-beb5586b3209
Li, Ding
83b05179-aa88-4a71-b298-5c97a3f0cdda
Zhou, Si
4d888ef9-73bb-4fde-969e-5003c5c0b146
Fu, Yaoyao
32bae389-e7f1-4fbc-9544-a115cfbc3a3b

Zhang, Zhichao, Li, Ding, Zhou, Si and Fu, Yaoyao (2014) Fund family tournament and performance consequences: evidence from the UK fund industry. Multinational Finance Journal, 18 (1/2), 43-84. (doi:10.17578/18-1/2-2).

Record type: Article

Abstract

By applying tournament analysis to the UK Unit Trusts data, the results support significant risk shifting in the family tournament; i.e. interim winning managers tend to increase their level of risk exposure more than losing managers. It also shows that the risk-adjusted returns of the winners outperform those of the losers following the risk taking, which implies that risk altering can be regarded as an indication of managers’ superior ability. However, the tournament behaviour can still be a costly strategy for investors, since winners can be seen to beat losers in the observed returns due to the deterioration in the performance of their major portfolio holdings.

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e-pub ahead of print date: 1 June 2014
Published date: 1 June 2014
Organisations: Southampton Business School

Identifiers

Local EPrints ID: 371587
URI: http://eprints.soton.ac.uk/id/eprint/371587
ISSN: 1096-1879
PURE UUID: a31b1aa0-ded3-489e-b5d1-b38dd8ba5b33

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Date deposited: 10 Nov 2014 13:46
Last modified: 11 Dec 2021 05:27

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Contributors

Author: Zhichao Zhang
Author: Ding Li
Author: Si Zhou
Author: Yaoyao Fu

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