Fund Manager Characteristics and Performance

Fang, Yi and Wang, Haiping (2014): Fund Manager Characteristics and Performance. Forthcoming in: Investment Analysts Journal

Abstract

This study establishes a multi-tier framework to evaluate how fund manager characteristics systematically affect mutual fund performance. The framework includes three tiers of performance elements: 1) comprehensive performance, 2) return and risk, and 3) timing skill and picking ability. Using performance decomposition, our evidence indicates that various characteristics take distinct channels to influence return, risk, and fund manager abilities, which in turn affect comprehensive performance. In particular, having a degree of Master of Business Administration or a Chartered Financial Analyst qualification is significantly associated with a fund manager’s better stock picking ability, higher excess returns, and better comprehensive performance.

• Item Type: MPRA Paper
• Language: English
• Keywords: Fund manager characteristics; mutual fund performance; Sharpe ratio; excess return; total risk; market timing skill; stock picking ability
• Subjects: G - Financial Economics > G1 - General Financial Markets > G10 - General; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors

References

Atkinson SM, Baird SB, Frye, MB. 2003. Do female mutual fund managers manage differently? Journal of Financial Research, 26(1): 1–18.

Barber BM and Odean T. 2001. Boys will be boys: Gender, overconfidence, and common stock investment. Quarterly Journal of Economics, 116 (1): 261–292.

Carter JR, and Irons MD. 1991. Are economists different, and if so, why? Journal of Economic Perspectives, 5(2):171–177.

Chevalier J, and Ellison G. 1999. Are some mutual fund managers better than others? Cross-sectional patterns in behavior and performance. Journal of Finance, 54(4): 133–148.

Davis P. 2002. Estimating multi-way error components models with unbalanced panel data structure. Journal of Econometrics, 106 (1): 67–95.

Dowd K. 1999. Financial risk management. Financial Analysts Journal, 55(4): 65–71.

Eling M. 2008. Does the measure matter in the mutual fund industry? Financial Analysts Journal, 64(3):1–13.

Friis, LB and Smit, EM. 2004. Are some fund managers better than others? Manager characteristics and fund performance. South African Journal of Business Management, 35(3): 31–40.

Golec JH. 1996. The effect of mutual fund managers’ characteristics on their portfolio performance risk and fees. Financial Service Review, 5(2): 133–148.

Gottesman AA and Morey MR. 2006. Manager education and mutual fund performance. Journal of Empirical Finance, 13(2): 145–182.

Hu J, Yu H and Wang Y. 2012. Manager attributes and fund performance: Evidence from Taiwan. Journal of Applied Finance & Banking, 2(4): 85–101.

Ingersoll JE. 1987. Theory of financial decision making. Totowa, NJ: Rowman & Littlefield.

Jensen MC. 1972. Capital markets: Theory and evidence. Bell Journal of Economics and Management Science, 3(2): 357–398.

Lee J, Yen P and Chen Y. 2008. Longer tenure, greater seniority, or both? Evidence from open-end equity mutual fund managers in Taiwan. Asian Academy of Management Journal of Accounting and Finance, 4(2): 1–20.

Li H, Zhang X and Zhao R. 2011. Investing in talents: Manager characteristics and hedge fund performances. Journal of Financial and Quantitative, 46(1): 59–82.

Lo AW. 2002. The statistics of Sharpe ratios. Financial Analysts Journal, 58(4): 36–52.

McEvoy GM and Cascio WF. 1987. Do good or poor performers leave? A meta-analysis of the relation between performance and turnover. Academy of Management Journal, 30(4): 744–762.

Roll R. 1978. Ambiguity when performance is measured by the securities market line. Journal of Finance, 33(4): 1051–1069.

Sharpe WF. 1966. Mutual fund performance. Journal of Business, 39(1): 119–138.

Shukla R and Singh S. 1994. Are CFA charterholders better equity fund managers? Financial Analysts Journal, 50(6): 68–74.

Singh S. 2012. Investor irrationality and self-defeating behavior: Insights from behavioral finance. Journal of Global Business Management, 8(1): 116–122.

Treynor J.L. 1965. How to rate management of investment funds. Harvard Business Review, 43(1), 63–75

Treynor J.L. and Mazuy K. 1966. Can mutual funds outguess the market? Harvard Business Review, 44(4): 131–136.

Zhou Z. 2010. Impact of academic experience in economics on risk preferences and rationality: An empirical investigation working paper, Occidental College.

Zuckerman M. 1991. Psychobiology of personality. Cambridge, MA: Cambridge University Press.