Joint Econometrics-Finance Lunch Seminar: Ran Xing, AU

Title: Equilibrium Distribution of Mutual Fund Investment Horizon and Value Added under Career Concern

2020.08.27 | Pernille Vorsø Jachobsen

Date Tue 08 Dec
Time 12:05 12:35
Location Online

Presenter: Ran Xing, AU

Title:  Equilibrium Distribution of Mutual Fund Investment Horizon and Value Added under Career Concern

Abstract: We extend the Berk and Green’s model to a stationary dynamic equilibrium setting, where mutual fund managers choose between investment opportunities with different investment horizons and limited capacities. Our model predicts that new fund managers compete for short-term opportunities that reveal their skills faster than long-term opportunities. This competition reduces the total value added of mutual funds in the short-term and makes the stock price more efficient at higher frequencies. Instead, old skilled fund managers extract value mainly from long-term opportunities. Consistent with these predictions, we show empirically that the funds managed by new fund managers have higher turnovers and smaller value added, and the trades of mutual funds on average do not add value in the first seven months.

 

The 'Accounting and Finance' and 'Econometrics and Business Statistics' Sections arrange lunch seminars on a regular basis. The speakers are usually section members, mostly PhD students and postdocs. The speakers can also be visiting PhD students or professors. Each lunch seminar is followed by a discussion of the paper presented.

Organizer: Daniel Borup

Joint Econometrics-Finance Lunch Seminars