TY - JOUR
T1 - Strategic Choice of Risk
T2 - Evidence from Mutual Fund Families
AU - Chan, Chia Ying
AU - Lai, Christine W.
AU - Lee, Liang Chung
N1 - Funding Information:
Christine W. Lai (corresponding author) wishes to thank the Ministry of Science and Technology in Taiwan for awarding a grant 103-2410-H-003 -031 -.
Publisher Copyright:
© 2016, Springer Science+Business Media New York.
PY - 2017/2/1
Y1 - 2017/2/1
N2 - This study examines family-level risk taking behavior from the perspective of the strategic choice of risk. We examine whether family-level risk taking tendency is affected by a fund family’s flow tournament position in the mutual fund industry. We use family-level excess fund flow, which is defined by the gap between the actual net flows and expected net flows of a fund family, to proxy for its interim fund-flow tournament position. A fund family is an interim winner (loser) if it experiences better (worse) than expected net flows. Two measures are used to proxy for risk taking strategy: (1) Active Share; and (2) the Standard Deviation of Fund Holdings at Family Level. Overall, we conclude that fund families classified as interim losers and top interim winners in a net flow tournament position exhibit risk taking propensities. Bottom dwellers increase risk for survival, whereas leaders increase risk to retain their leadership.
AB - This study examines family-level risk taking behavior from the perspective of the strategic choice of risk. We examine whether family-level risk taking tendency is affected by a fund family’s flow tournament position in the mutual fund industry. We use family-level excess fund flow, which is defined by the gap between the actual net flows and expected net flows of a fund family, to proxy for its interim fund-flow tournament position. A fund family is an interim winner (loser) if it experiences better (worse) than expected net flows. Two measures are used to proxy for risk taking strategy: (1) Active Share; and (2) the Standard Deviation of Fund Holdings at Family Level. Overall, we conclude that fund families classified as interim losers and top interim winners in a net flow tournament position exhibit risk taking propensities. Bottom dwellers increase risk for survival, whereas leaders increase risk to retain their leadership.
KW - Fund-flow tournament
KW - Mutual fund family
KW - Risk taking
KW - Strategic choice of risk
UR - http://www.scopus.com/inward/record.url?scp=84960439315&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84960439315&partnerID=8YFLogxK
U2 - 10.1007/s10693-016-0242-5
DO - 10.1007/s10693-016-0242-5
M3 - Article
AN - SCOPUS:84960439315
SN - 0920-8550
VL - 51
SP - 125
EP - 163
JO - Journal of Financial Services Research
JF - Journal of Financial Services Research
IS - 1
ER -