WHEN CHEAPER IS BETTER: FEE DETERMINATION IN THE MARKET FOR EQUITY MUTUAL FUNDS

In this paper, we develop a model of the market for equity mutual funds that captures three key characteristics of this market. First, there is competition among funds. Second, fund managers' ability is not observed by investors before making their investment decisions. And third, some investors do not make optimal use of all available information. The main results of the paper are that 1) price competition is compatible with positive mark-ups in equilibrium; and 2) worse-performing funds set fees that are greater or equal than those set by better-performing funds. These predictions are supported by available empirical evidence.

YET ANOTHER PUZZLE? THE RELATION BETWEEN PRICE AND PERFORMANCE IN THE MUTUAL FUND INDUSTRY

Gruber (1996) drew attention to the puzzle that investors buy actively-managed funds even though, on average, they underperform index funds. We uncover another puzzling fact about the market for actively-managed equity mutual funds: funds with worse before-fee performance charge higher fees. We then conduct a series of robustness checks and find that the apparently anomalous fee-performance relation survives all of them. Finally, we show that this relation may be explained as the outcome of strategic fee setting by mutual funds in the presence of investors with different degrees of sensitivity to performance.

Corporate governance when managers set their own pay

This paper presents a model of the firm in which the manager has discretion over his own compensation, constrained only by the threat of shareholder intervention. The model addresses two questions: How does shareholder power affect managers' compensation and their incentives to maximize firm value? And, which is the optimal level of shareholder power? Increasing shareholder power leads to lower managerial pay, yet it also weakens managers' incentives to maximize value. The model shows that, because of this incentive effect, restricting shareholder power is necessary to obtain financing, and offers predictions about the relation between the optimal level of shareholder power, performance and firm characteristics.

The performance of socially responsible mutual funds: the role of fees and management companies

In this paper, we shed light on the debate about the financial performance of socially responsible investment (SRI) mutual funds by separately analyzing the contributions of before-fee performance and fees to SRI funds' performance and by investigating the role played by fund management companies in the determination of those variables. We apply the matching estimator methodology to obtain our results and find that in the period 1997-2005, US SRI funds had significantly higher fees and better before- and after-fee performance than conventional funds with similar characteristics. Differences, however, were driven exclusively by SRI funds run by management companies specialized in socially responsible investment.Socially responsible investment, Mutual fund fees, Mutual fund performance, Matching estimators

Leverage, CEO Risk–Taking Incentives, and Bank Failure during the 2007–2010 Financial Crisis

Usual measures of the risk-taking incentives of bank CEOs do not capture the risk-shifting incentives that the exposure of a CEO’s wealth to his firm’s stock price (delta) creates in highly levered firms. We find evidence consistent with the importance of these incentives for bank CEOs: In a sample of large U.S. financial firms, a higher pre-crisis delta is associated with a significantly higher probability of failure during the 2007–2010 financial crisis in highly levered firms, but not in less levered firms

Comparison of orientated and spatially variant morphological filters vs mean/median filters for adaptive image denoising

Presentation available at http://www.tic.upct.es/rafael.verdu/slides/slides2010icip.pdfISBN: 978-142447994-8International audienceThis paper shows a comparison of spatially-variant discrete operators for denoising gray-level images. These non-iterative operators use a neighborhood that varies over space, adapting their shape and orientation according to the data of the image under study. The orientation of the neighborhood is computed by means of a diffusion process of the average square gradient field, which regularizes and extends the orientation information from the edges of the objects to the homogeneous areas of the image; and the shape of the orientated neighborhood can be either a linear segment or a rectangle of anisotropy given by the distance to relevant edges of the objects. Results on gray-level images show the ability of spatially-variant morphological operators for adaptively preserving the main structures in the image while reducing the noise

Hyperspectral remote sensing of cyanobacterial pigments as indicators for cell populations and toxins in eutrophic lakes

The growth of mass populations of toxin-producing cyanobacteria is a serious concern for the ecological status of inland waterbodies and for human and animal health. In this study we examined the performance of four semi-analytical algorithms for the retrieval of chlorophyll a (Chl a) and phycocyanin (C-PC) from data acquired by the Compact Airborne Spectrographic Imager-2 (CASI-2) and the Airborne Imaging Spectrometer for Applications (AISA) Eagle sensor. The retrieval accuracies of the semi-analytical models were compared to those returned by optimally calibrated empirical band-ratio algorithms. The best-performing algorithm for the retrieval of Chl a was an empirical band-ratio model based on a quadratic function of the ratio of re!ectance at 710 and 670 nm (R2=0.832; RMSE=29.8%). However, this model only provided a marginally better retrieval than the best semi-analytical algorithm. The best-performing model for the retrieval of C-PC was a semi-analytical nested band-ratio model (R2=0.984; RMSE=3.98 mg m−3). The concentrations of C-PC retrieved using the semi-analytical model were correlated with cyanobacterial cell numbers (R2=0.380) and the particulate and total (particulate plus dissolved) pools of microcystins (R2=0.858 and 0.896 respectively). Importantly, both the empirical and semi-analytical algorithms were able to retrieve the concentration of C-PC at cyanobacterial cell concentrations below current warning thresholds for cyanobacteria in waterbodies. This demonstrates the potential of remote sensing to contribute to early-warning detection and monitoring of cyanobacterial blooms for human health protection at regional and global scales

Optical types of inland and coastal waters

Inland and coastal waterbodies are critical components of the global biosphere. Timely monitoring is necessary to enhance our understanding of their functions, the drivers impacting on these functions and to deliver more effective management. The ability to observe waterbodies from space has led to Earth observation (EO) becoming established as an important source of information on water quality and ecosystem condition. However, progress toward a globally valid EO approach is still largely hampered by inconsistences over temporally and spatially variable in-water optical conditions. In this study, a comprehensive dataset from more than 250 aquatic systems, representing a wide range of conditions, was analyzed in order to develop a typology of optical water types (OWTs) for inland and coastal waters. We introduce a novel approach for clustering in situ hyperspectral water reflectance measurements (n = 4045) from multiple sources based on a functional data analysis. The resulting classification algorithm identified 13 spectrally distinct clusters of measurements in inland waters, and a further nine clusters from the marine environment. The distinction and characterization of OWTs was supported by the availability of a wide range of coincident data on biogeochemical and inherent optical properties from inland waters. Phylogenetic trees based on the shapes of cluster means were constructed to identify similarities among the derived clusters with respect to spectral diversity. This typification provides a valuable framework for a globally applicable EO scheme and the design of future EO missions

Advancing cyanobacteria biomass estimation from hyperspectral observations: Demonstrations with HICO and PRISMA imagery

Retrieval of the phycocyanin concentration (PC), a characteristic pigment of, and proxy for, cyanobacteria biomass, from hyperspectral satellite remote sensing measurements is challenging due to uncertainties in the remote sensing reflectance (∆Rrs) resulting from atmospheric correction and instrument radiometric noise. Although several individual algorithms have been proven to capture local variations in cyanobacteria biomass in specific regions, their performance has not been assessed on hyperspectral images from satellite sensors. Our work leverages a machine-learning model, Mixture Density Networks (MDNs), trained on a large (N = 939) dataset of collocated in situ chlorophyll-a concentrations (Chla), PCs, and remote sensing reflectance (Rrs) measurements to estimate PC from all relevant spectral bands. The performance of the developed model is demonstrated via PC maps produced from select images of the Hyperspectral Imager for the Coastal Ocean (HICO) and Italian Space Agency’s PRecursore IperSpettrale della Missione Applicativa (PRISMA) using a matchup dataset. As input to the MDN, we incorporate a combination of widely used band ratios (BRs) and line heights (LHs) taken from existing multispectral algorithms, that have been proven for both Chla and PC esti�mation, as well as novel BRs and LHs to increase the overall cyanobacteria biomass estimation accuracy and reduce the sensitivity to ∆Rrs. When trained on a random half of the dataset, the MDN achieves uncertainties of 44.3%, which is less than half of the uncertainties of all viable optimized multispectral PC algorithms. The MDN is notably better than multispectral algorithms at preventing overestimation on low (10 mg m− 3). According to our extensive assessments, the developed model is anticipated to enable practical PC products from PRISMA and HICO, therefore the model is promising for planned hyperspectral missions, such as the Plankton Aerosol and Cloud Ecosystem (PACE). This advancement will enhance the complementary roles of hyperspectral radiometry from satellite and low-altitude platforms for quantifying and monitoring cyanobacteria harmful algal blooms at both large and local spatial scales

Advancing cyanobacteria biomass estimation from hyperspectral observations: Demonstrations with HICO and PRISMA imagery

Retrieval of the phycocyanin concentration (PC), a characteristic pigment of, and proxy for, cyanobacteria biomass, from hyperspectral satellite remote sensing measurements is challenging due to uncertainties in the remote sensing reflectance (∆Rrs) resulting from atmospheric correction and instrument radiometric noise. Although several individual algorithms have been proven to capture local variations in cyanobacteria biomass in specific regions, their performance has not been assessed on hyperspectral images from satellite sensors. Our work leverages a machine-learning model, Mixture Density Networks (MDNs), trained on a large (N = 939) dataset of collocated in situ chlorophyll-a concentrations (Chla), PCs, and remote sensing reflectance (Rrs) measurements to estimate PC from all relevant spectral bands. The performance of the developed model is demonstrated via PC maps produced from select images of the Hyperspectral Imager for the Coastal Ocean (HICO) and Italian Space Agency's PRecursore IperSpettrale della Missione Applicativa (PRISMA) using a matchup dataset. As input to the MDN, we incorporate a combination of widely used band ratios (BRs) and line heights (LHs) taken from existing multispectral algorithms, that have been proven for both Chla and PC estimation, as well as novel BRs and LHs to increase the overall cyanobacteria biomass estimation accuracy and reduce the sensitivity to ∆Rrs. When trained on a random half of the dataset, the MDN achieves uncertainties of 44.3%, which is less than half of the uncertainties of all viable optimized multispectral PC algorithms. The MDN is notably better than multispectral algorithms at preventing overestimation on low (10 mg m−3). According to our extensive assessments, the developed model is anticipated to enable practical PC products from PRISMA and HICO, therefore the model is promising for planned hyperspectral missions, such as the Plankton Aerosol and Cloud Ecosystem (PACE). This advancement will enhance the complementary roles of hyperspectral radiometry from satellite and low-altitude platforms for quantifying and monitoring cyanobacteria harmful algal blooms at both large and local spatial scales