A review of behavioural and management effects in mutual fund performance

This paper surveys and critically evaluates the literature on the role of management effects and fund characteristics in mutual fund performance. First, a brief overview of performance measures is provided. Second, empirical findings on the predictive power of fund characteristics in explaining future returns are discussed. Third, the paper reviews the literature on fund manager behavioural biases and the impact these have on risk taking and returns. Finally, the impact of organizational structure, governance and strategy on both fund risk taking and future performance is examined. While a number of surveys on mutual fund performance are available, these have not focused on the role of manager behavioural biases, manager characteristics and fund management strategic behavior on fund performance and risk taking. This review is an attempt to fill this gap. Empirical results indicate that finding successful funds ex-ante is extremely difficult, if not impossible. In contrast, there is strong evidence that poor performance persists for many of the prior "loser fractile" portfolios of funds. A number of manager behavioural biases are prevalent in the mutual fund industry and they generally detract from returns

Atomic oxygen beam source for erosion simulation

A device for the production of low energy (3 to 10 eV) neutral atomic beams for surface modification studies is described that reproduces the flux of atomic oxygen in low Earth orbit. The beam is produced by the acceleration of plasma ions onto a negatively biased plate of high-Z metal; the ions are neutralized and reflected by the surface, retaining some fraction of their incident kinetic energy, forming a beam of atoms. The plasma is generated by a coaxial RF exciter which produces a magnetically-confined (4 kG) plasma column. At the end of the column, ions fall through the sheath to the plate, whose bias relative to the plasma can be varied to adjust the beam energy. The source provides a neutral flux approximately equal to 5 x 10(exp 16)/sq cm at a distance of 9 cm and a fluence approximately equal to 10(exp 20)/sq cm in five hours. The composition and energy of inert gas beams was diagnosed using a mass spectometer/energy analyzer. The energy spectra of the beams demonstrate energies in the range 5 to 15 eV, and qualitatively show expected dependences upon incident and reflecting atom species and potential drop. Samples of carbon film, carbon-based paint, Kapton, mylar, and teflon exposed to atomic O beams show erosion quite similar to that observed in orbit on the space shuttle

Market and Style Timing: German Equity and Bond Funds

We apply parametric and non-parametric estimates to test market and style timing ability of individual German equity and bond mutual funds using a sample of over 500 equity and 350 bond funds, over the period 1990-2009. For equity funds, both approaches indicate no successful market timers in the 1990-1999 or 2000-2009 periods, but in 2000-2009 the non-parametric approach gives fewer unsuccessful market timers than the parametric approach. There is evidence of successful style timing using the parametric approach, and unsuccessful style timing, particularly in the 2000-2009 period. There is evidence of positive and negative bond timing in the 2000-09 period

Measurement of radiation-pressure-induced optomechanical dynamics in a suspended Fabry-Perot cavity

We report on experimental observation of radiation-pressure induced effects in a high-power optical cavity. These effects play an important role in next generation gravitational wave (GW) detectors, as well as in quantum non-demolition (QND) interferometers. We measure the properties of an optical spring, created by coupling of an intense laser field to the pendulum mode of a suspended mirror; and also the parametric instability (PI) that arises from the nonlinear coupling between acoustic modes of the cavity mirrors and the cavity optical mode. Specifically, we measure an optical rigidity of $K = 3 \times 10^4$ N/m, and PI value $R = 3$.Comment: 4 pages, 3 figure

The Market Timing Ability of UK Equity Mutual Funds

We apply a recent nonparametric methodology to test the market timing skills of UK equity mutual funds. The methodology has a number of advantages over the widely used regression based tests of Treynor-Mazuy (1966) and Henriksson-Merton (1981). We find a relatively small number of funds (around 1.5%) demonstrate positive market timing ability at a 5% significance level, while around 10-20% of funds exhibit negative (perverse) timing and most funds do not time the market. Our findings indicate that the few skillful market timers possess private market timing signals so their performance cannot be attributed to publicly available information. In terms of fund classifications, there are a small number of successful positive market timers amongst equity income and general equity funds, while a few small company funds time a small company rather than a broad market index. We also apply regression based tests of volatility timing and find evidence that a slightly larger (around 5%) of funds successful time market volatility

False Discoveries: Winners and Losers in Mutual Fund Performance

We use a multiple hypothesis testing framework to estimate the false discovery rate (FDR) amongst UK equity mutual funds. For all funds, we find a relatively high FDR for the best funds of 67% (at a 10% significance level), which indicates that only around 2% of all funds truly outperform their benchmarks. For the worst funds the FDR (at a 10% significance level), is relatively small at 15.9% which results in 20% of funds which truly underperform their benchmarks. For different investment styles, this pattern of very few genuine winner funds is repeated for all companies, small companies and equity income funds. However, forming portfolios of funds based on a set of funds for which the FDR is relatively low, produces positive alphas

What Does Rebalancing Really Achieve?

There is now a substantial literature on the effects of rebalancing on portfolio performance. However, this literature contains frequent misattribution between ‘rebalancing returns’ which are specific to the act of rebalancing, and ‘diversification returns’ which can be earned by both rebalanced and unrebalanced strategies. Confusion on this issue can encourage investors to follow strategies which involve insufficient diversification and excessive transactions costs. This paper identifies the misleading claims that are made for rebalanced strategies and demonstrates theoretically and by simulation that the apparent advantages of rebalanced strategies over infinite horizons give an inaccurate impression of their performance over finite horizons

Characterization of a 5-eV neutral atomic oxygen beam facility

An experimental effort to characterize an existing 5-eV neutral atomic oxygen beam facility being developed at Princeton Plasma Physics Laboratory is described. This characterization effort includes atomic oxygen flux and flux distribution measurements using a catalytic probe, energy determination using a commercially designed quadrupole mass spectrometer (QMS), and the exposure of oxygen-sensitive materials in this beam facility. Also, comparisons were drawn between the reaction efficiencies of materials exposed in plasma ashers, and the reaction efficiencies previously estimated from space flight experiments. The results of this study show that the beam facility is capable of producing a directional beam of neutral atomic oxygen atoms with the needed flux and energy to simulate low Earth orbit (LEO) conditions for real time accelerated testing. The flux distribution in this facility is uniform to +/- 6 percent of the peak flux over a beam diameter of 6 cm

Compensation between meridional flow components of the Atlantic MOC at 26°N

From ten years of observations of the Atlantic meridional overturning circulation (MOC) at 26° N (2004–2014), we revisit the question of flow compensation between components of the circulation. Contrasting with early results from the observations, transport variations of the Florida Current (FC) and upper mid-ocean (UMO) transports (top 1000 m east of the Bahamas) are now found to compensate on sub-annual timescales. The observed compensation between the FC and UMO transports is associated with horizontal circulation and means that this part of the correlated variability does not project onto the MOC. A deep baroclinic response to wind-forcing (Ekman transport) is also found in the lower North Atlantic Deep Water (LNADW; 3000–5000 m) transport. In contrast, co-variability between Ekman and the LNADW transports does contribute to overturning. On longer timescales, the southward UMO transport has continued to strengthen, resulting in a continued decline of the MOC. Most of this interannual variability of the MOC can be traced to changes in isopycnal displacements on the western boundary, within the top 1000 m and below 2000 m. Substantial trends are observed in isopycnal displacements in the deep ocean, underscoring the importance of deep boundary measurements to capture the variability of the Atlantic MOC

Refractive Index of Humid Air in the Infrared: Model Fits

The theory of summation of electromagnetic line transitions is used to tabulate the Taylor expansion of the refractive index of humid air over the basic independent parameters (temperature, pressure, humidity, wavelength) in five separate infrared regions from the H to the Q band at a fixed percentage of Carbon Dioxide. These are least-squares fits to raw, highly resolved spectra for a set of temperatures from 10 to 25 C, a set of pressures from 500 to 1023 hPa, and a set of relative humidities from 5 to 60%. These choices reflect the prospective application to characterize ambient air at mountain altitudes of astronomical telescopes.Comment: Corrected exponents of c0ref, c1ref and c1p in Table