Do Fund Managers Expect Mean Averting Returns?

Abstract This paper finds that fund managers do not expect mean reverting returns, as suggested by theory and empirical evidence, but mean averting returns. The degree of mean aversion is positively related to preferences for non-fundamental information and loss aversion

Sichtweisen und Anlageverhalten des österreichischen Fondsmanagements

Die Untersuchung basiert auf einer schriftlichen Befragung von Fondsmanagern in Österreich. Sie offenbart deren positive Selbsteinschätzung hinsichtlich des beruflichen Erfolges, ohne dabei mit exzessiver Überschätzung des eigenen Informationsstandes verbunden zu sein. Das Anlageverhalten der Fondsmanager weist grundsätzlich kaum Verzerrungen auf - weder exzessive Handelsaktivität, noch einen Dispositionseffekt oder Verlustaversion. Allerdings ist festzustellen, dass insbesondere jüngere, unerfahrene Fondsmanager zum Herdenverhalten neigen. In der Untersuchung offenbaren letztere aber keine höhere Risikoaversion, die im Allgemeinen mit Herdenverhalten assoziiert wird.Fondsmanagement, Overconfidence, Herdenverhalten, Entscheidungsverhalten

Risk Management, Rational Herding and Institutional Investors: A Macro View

As institutional investors are engaged to realize attractive risk-adjusted returns, they can by definition be seen as risk managers. This paper analyzes their risk management behavior from a macro perspective and focuses on their incentives for rational herding. Based on a questionnaire survey we find clear evidence of herding among fund managers in Germany. While all different subgroups of fund managers perceive institutional herding, senior fund managers perceive herding even more strongly than more junior managers. Regarding herding as rational strategy of adapting to incentives, one might ascribe this finding to the higher pressure of success that senior managers face.Institutional investors, herd behavior, momentum strategy

What Drives Home Bias? Evidence from Fund Managers Views

A survey of fund managers reveals home bias for these sophisticated investors in an unrestricted setting. Proximity, perceived informational advantage and higher expected returns are confirmed as accompanying factors. In addition, the home bias of equity managers is also related to institutional, informational and behavioral characteristics. The perceived informational advantage does not seem to be valid. Multivariate analyses indicate that home bias is mainly related to relative return optimism, non-fundamental information and peculiar behavior towards risk. We interpret these as characteristics of less than fully rational behavior. It is consistently found that this pattern does not apply to bond managers.Home bias, institutional investors, local information advantage, non-fundamental information, disposition effect

Italian Asset Managers’ Behavior: Evidence on Overconfidence, Risk Taking and Gender

This paper offers new insights into the Italian mutual fund industry. Surveying Italian professionals, we do not only reveal typical gender differences but also detect divergence to their German counterparts. While disclosing Italian professionals’ overly positive self-assessment in general, we find evidence for male overconfidence in particular though without being accompanied by excessive control illusion of the own information level. Asset managers’ risk taking reveals further differences: Italian female professionals do not only assess themselves as more risk averse than their male colleagues, they also prefer a more passive portfolio management compared to the level they are allowed to. Moreover, in a tournament scenario near the end of the investment period female asset managers do not try to become the ultimate top performer when they have outperformed their peer group so far. However, in case of underperformance, the risk of deviating from the benchmark makes especially female professionals willing to seize a chance of catching up. Overall, compared to their German counterparts, we find Italian asset managers to be slightly more risk averse. Matching bounded former results on Italian mutual funds, we discuss interdependencies as well as impact of our findings at the individual asset managers’ level on trading activity, management style and performance.Institutional investors, Gender, Overconfidence, Risk taking, Tournament behavior