Top Research Papers on Mutual Funds

Abstract Climate change poses new challenges for portfolio management. In our not-yet-low carbon world, investors face a trade-off between minimizing their exposure to climate risks and maximizing the benefits of portfolio diversification. This article investigates how investors and financial intermediaries navigate this trade-off. After the release of Morningstar’s novel carbon risk metrics in April 2018, mutual funds labeled as “low carbon” experienced a significant increase in investor demand, especially those with high risk-adjusted returns. Fund managers actively reduced their exposure to...

Abstract We construct optimal portfolios of mutual funds whose objectives include socially responsible investment (SRI). Comparing portfolios of these funds to those constructed from the broader fund universe reveals the cost of imposing the SRI constraint on investors seeking the highest Sharpe ratio. This SRI cost crucially depends on the investor’s views about asset pricing models and stock-picking skill by fund managers. To an investor who strongly believes in the CAPM and rules out managerial skill, that is, a market index investor, the cost of the SRI constraint is typically just a few b...

ABSTRACT I demonstrate that skill and scale are mismatched among actively managed equity mutual funds. Many mutual fund investors confuse the effects of fund exposures to common systematic factors with managerial skill when allocating capital among funds. Active mutual funds with positive factor‐related past returns thus accumulate assets to the point that they significantly underperform. I also show that the negative aggregate benchmark‐adjusted performance of active equity mutual funds is driven mainly by these oversized funds.

Abstract We identify fixed-income mutual funds as an important contributor to the unusually high selling pressure in liquid asset markets during the COVID-19 crisis. We show that mutual funds experienced pronounced investor outflows amplified by their liquidity transformation. In meeting redemptions, funds followed a pecking order by first selling their liquid assets, including Treasuries and high-quality corporate bonds, which generated the most concentrated selling pressure in these markets. Overall, the estimated price impact of mutual funds was sizable at a third of the increase in Treasur...

We identify fixed-income mutual funds as an important contributor to the unusually high selling pressure in liquid asset markets during the Covid-19 crisis. We show that mutual fund liquidity transformation led to pronounced investor outflows. In meeting redemptions, funds followed a pecking order by first selling their liquid assets, including Treasuries and high-quality corporate bonds, which generated the most concentrated selling pressure in these markets. The Fed's announced purchase of illiquid securities effectively stabilized mutual fund liquidity transformation and alleviated the sell...

Abstract We provide evidence regarding mutual funds’ motivation to hold lottery stocks. Funds with higher managerial ownership invest less in lottery stocks, suggesting that managers themselves do not prefer such stocks. The evidence instead supports that managers cater to fund investors’ preference for such stocks. In particular, funds with more lottery holdings attract larger flows after portfolio disclosure compared with their peers, and poorly performing funds tend to engage in risk shifting by increasing their lottery holdings toward year-ends. Funds’ aggregate holdings of lottery stocks ...

Corporate bond mutual funds engage in liquidity transformation, raising concerns among academics and policy makers that large redemptions will lead to asset fire sales. We find little evidence, however, that bond fund redemptions drive fire sale price pressure after controlling for time-varying issuer-level information that could also affect funds' trading decisions, using a novel identification strategy that exploits same-issuer bonds held by funds with differing outflows. We attribute our findings, which contrast with those found for equity funds, to funds' liquidity management strategies. B...

ABSTRACT A large and rapidly growing literature examines the impact of misvaluation on firm policies by using mutual fund outflow‐induced price pressure to isolate nonfundamental price variation. I demonstrate that the standard approach to computing outflow‐induced price pressure produces a measure that is inadvertently a direct function of a stock's actual realized return during the outflow quarter, raising doubts about its orthogonality to fundamentals. After removing these direct measurements of return, outflows generate a fairly negligible quarterly decline in returns, with no subsequent r...

This study seeks to determine whether mutual fund decarbonization affects the stock prices of divested firms and contributes to the reduction of these firms' carbon emissions. Using a new methodology to identify equity mutual funds' decarbonization trades, we calculate a metric of decarbonization selling pressure (DSP) on stocks. Controlling for endogeneity and selection bias, we find that high DSP sustainably pressures stock prices downwards. Furthermore, we find that divested firms experiencing a stock price decline subsequently reduce their carbon emissions compared to non-divested firms. T...

Abstract We show that mutual fund investors rely on simple signals and likely do not engage in sophisticated learning about managers’ alpha as widely believed. Simplistic performance chasing best explains aggregate flows to the mutual fund space and flows across funds. These results hold for both actively managed and passive index funds. Empirical patterns commonly interpreted as reflecting learning about managerial skill also appear in falsification tests and are mechanical. Our results are consistent with the view that, on average, households are homo sapiens with limited financial sophistic...

Abstract We document that U.S. mutual funds with investment objectives designated as “Sustainable Investment Overall” by Morningstar (ESG funds) are more likely than other mutual funds to vote in support of environmental and social (ES) shareholder proposals and governance (G) shareholder proposals. We also find that the higher support for ES proposals by ESG funds relative to other funds is more pronounced in index funds than in active funds, consistent with trading constraints influencing voting behavior. While these results provide evidence that ESG funds “walk the talk” with their voting b...

A comprehensive analysis of the performance and flows of U S actively-managed equity mutual funds during the COVID-19 crisis of 2020 finds that the funds lost money during the crisis.

Using a comprehensive list of terrorist attacks over three decades, we find that aggregate investor risk aversion inversely relates to terrorist activity in the United States. A one standard deviation increase in the number of attacks each month leads to a $75.09 million drop in aggregate flows to equity funds and a $56.81 million increase to government bond funds. Tests on alternative channels further suggest that the shift in aggregate risk aversion is driven mainly by an emotional shock rather than changes in wealth or the outside environment. We also investigate possible alternate explanat...

Comparison of actively managed mutual funds in BRICS between 2011 and 2019 shows that green funds outperform their counterparts for the entire sample and within-country assessment, and proposes various interventions that could foster the adaptability of a carbon-neutral investment landscape.

This paper analyzes the effect of the Sustainable Finance Disclosure Regulation (SFDR) on mutual funds and individual investors in the EU. First, we study whether affected funds increase their sustainability compared to a control group. Second, we examine if the regulation makes individual investors allocate more capital into more sustainable funds. In a difference-in-differences setting, we analyze the influence of the regulation on ESG fund scores and fund net inflows. Our results show that affected funds increase their sustainability rating after the policy intervention. Additionally, we fi...

This study made it possible to evaluate the penetration rate of mutual health insurance in the Thiès region in 2023, but also to identify the factors associated with membership in a mutual health insurance.

Renewable energy sources have significant socio-economic benefits. Usually, the investment in such ventures is financed by the states. However, the growing scale warrants enhanced participation from financial markets. In this paper, we assess the attractiveness of renewable investments by comparing the performance of alternative energy-focused equity funds against their conventional counterparts. The sample spans over ten years from 2010 to 2019 and includes 3886 funds across nineteen Eurozone countries. Our findings suggest that renewable energy funds underperform traditional peers and market...

We study tradeoffs among active mutual funds’ characteristics. In both our equilibrium model and the data, funds with larger size, lower expense ratio, and higher turnover hold more-liquid portfolios. Portfolio liquidity, a concept introduced here, depends not only on the liquidity of the portfolio’s holdings but also on the portfolio’s diversification. We also confirm other model-predicted tradeoffs. Larger funds are cheaper. Larger and cheaper funds are less active, based on our new measure of activeness. Better-diversified funds hold less-liquid stocks; they are also larger and cheaper, and...

Abstract Hedge funds that endorse the United Nations Principles for Responsible Investment (PRI) underperform other hedge funds after adjusting for risk but attract greater investor flows, accumulate more assets, and harvest greater fee revenues. Consistent with an agency explanation, the underperformance is driven by PRI signatories with low environmental, social, and governance (ESG) exposures and is greater for hedge funds with poor incentive alignment. To address endogeneity, we exploit regulatory reforms that enhance stewardship and show that the ESG exposure and relative performance of s...

This nationwide network of BME women faculty collectively argue that racial funding disparity by the National Institutes of Health remains the most insidious barrier to success of Black faculty in the authors' profession.

The rate of obesity was increased during this era of the COVID-19 epidemic, and obesity is associated with other co-morbidities that could affect the prognosis of CO VID-19 patients.

This paper proposes a novel mutual information-driven Pan-sharpening framework that outperforms other state-of-the-art methods qualitatively and quantitatively with great generalization ability to real-world scenes.

Experimental evolution is used to causally show that initially plant-antagonistic Pseudomonas protegens bacteria evolve into mutualists in the rhizosphere of Arabidopsis thaliana within six plant growth cycles (6 months), accompanied with increased mutualist fitness via two mechanisms.

MuTual is introduced, a novel dataset for Multi-Turn dialogue Reasoning, consisting of 8,860 manually annotated dialogues based on Chinese student English listening comprehension exams, which shows that there is ample room for improving reasoning ability.

A novel Mutual Graph Learning (MGL) model is designed, which generalizes the idea of conventional mutual learning from regular grids to the graph domain and fully exploits the mutual benefits by recurrently reasoning their high-order relations through graphs.

This paper reviews the methodologies used to set interest rates on three prominent DeFi PLFs, namely Compound, Aave and dYdX and investigates the market efficiency and inter-connectedness between multiple protocols, examining whether Uncovered Interest Parity holds within a particular protocol and whether the interest rates for a particular token market show dependence across protocols.

Abstract Passively managed index funds now hold over 30$\%$ of U.S. equity fund assets; this shift raises fundamental questions about monitoring and governance. We show that, relative to active funds, index funds are less effective monitors: (a) they are less likely to vote against firm management on contentious governance issues; (b) there is no evidence they engage effectively publicly or privately; and (c) they promote less board independence and worse pay-performance sensitivity at their portfolio companies. Overall, the rise of index funds decreases the alignment of incentives between ben...

A physics and electromagnetic (EM) compliant communication model for analyzing and optimizing RIS-assisted wireless systems and accounts for the intertwinement between the amplitude and phase response of the unit cells of the RIS.

A novel duality-gated mutual condition network is proposed to fully exploit the discriminative information of all modalities while suppressing the effects of data noise to improve the quality of conditions and further reduce data noise.

The findings show that adaptive immunity suppresses harmful fungal effectors, with benefits to both C. albicans and its host.

This study shows that cationic proto-peptides engage in mutually stabilizing interactions with RNA, providing support for the co-evolution of these molecules.

Inspired by the mutual learning paradigm and binocular parallax, a unified framework is proposed, namely Binocular Mutual Learning (BML), which achieves the compatibility of the global view and the local view through both intraview and cross-view modeling.

Experimental results show that the proposed lightweight extension on top of BERT significantly outperforms other unsupervised sentence embedding baselines on common semantic textual similarity (STS) tasks and downstream supervised tasks, and achieves performance competitive with supervised methods on various tasks.

The latest research on the interconnectedness of these systems with an emphasis on how this cross talk is an important element in the success (or failure) of immune cell–based therapies is reviewed.

This paper proposes mutual training between two different models by a dynamically re-weighted loss function, called Dynamic Mutual Training (DMT), and quantifies inter-model disagreement by comparing predictions from two different models to dynamically re-weight loss in training.

Interventions based on microbiome studies, that is faecal microbiota transplantation, probiotics and prebiotics, are discussed to introduce the concept that correcting gut dysbiosis can ameliorate disease symptoms, thus offering a new approach towards disease treatment.

Abstract Niche Theory is a central framework in ecology based on the recognition that most interactions between organisms are indirect, mediated by the biotic and abiotic dynamical environment these organisms live in. Despite its potential generality, the theory still mostly focuses on how resource–consumer dynamics mediate competition in ecological communities. However, it is being increasingly recognized that positive interactions between organisms also play an important role in driving the structure and functioning of ecological communities, from plants to microbes. In this paper, we presen...

A bipartite graph embedding called BiGI is proposed to capture such global properties by introducing a novel local-global infomax objective and achieves consistent and significant improvements over state-of-the-art baselines.

The proposed Def-KT algorithm significantly outperforms the baseline DFL methods with model averaging, i.e., Combo and FullAvg, especially when the training data are not independent and identically distributed (non-IID) across different clients.

Knowledge of how science is consumed in public domains is essential for understanding the role of science in human society. Here we examine public use and public funding of science by linking tens of millions of scientific publications from all scientific fields to their upstream funding support and downstream public uses across three public domains-government documents, news media and marketplace invention. We find that different public domains draw from various scientific fields in specialized ways, showing diverse patterns of use. Yet, amidst these differences, we find two important forms o...