7 research outputs found
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Three essays in asset management
The objective of this paper is to examine whether short-term variation in the ranking of size and style index returns in the UK equity market is better predictable and exploitable by means of quantitative or momentum style rotation strategies. Using UK index data, we assess the profitability of a number of long-only and long/short multi-style rotation strategies based on these two alternative methods. The findings suggest that trading rules based on simple short-term momentum strategies are able to generate higher Sharpe ratios and greater end-of-period wealth at a reasonable level of transaction costs than our quantitatively based trading rules. This result is particularly pronounced among the long-only strategies
Classification of cryptocurrency coins and tokens by the dynamics of their market capitalisations
We empirically verify that the market capitalisations of coins and tokens in
the cryptocurrency universe follow power-law distributions with significantly
different values, with the tail exponent falling between 0.5 and 0.7 for coins,
and between 1.0 and 1.3 for tokens. We provide a rationale for this, based on a
simple proportional growth with birth & death model previously employed to
describe the size distribution of firms, cities, webpages, etc. We empirically
validate the model and its main predictions, in terms of proportional growth
(Gibrat's law) of the coins and tokens. Estimating the main parameters of the
model, the theoretical predictions for the power-law exponents of coin and
token distributions are in remarkable agreement with the empirical estimations,
given the simplicity of the model. Our results clearly characterize coins as
being "entrenched incumbents" and tokens as an "explosive immature ecosystem",
largely due to massive and exuberant Initial Coin Offering activity in the
token space. The theory predicts that the exponent for tokens should converge
to 1 in the future, reflecting a more reasonable rate of new entrants
associated with genuine technological innovations
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What impact does a change of fund manager have on mutual fund performance?
Using a unique database of UK fund manager changes over the period from 1997 to 2011, we examine the impact of such changes on fund performance. We find clear evidence to suggest that a manager change does affect the benchmark-adjusted performance of UK mutual funds. In particular we find a significant deterioration in the benchmark-adjusted returns of funds that were top performers before the manager exit and, conversely, a significant improvement in the average benchmark-adjusted returns of funds that were poor performers before the manager exit. Our use of the Carhart's (1997) four-factor model reveals that the improvement in average post manager exit performance is accompanied by a reduction in market risk, a slight reduction in exposure to small cap stocks, and an increase in exposure to value and momentum stocks. Overall, our results suggest that UK fund management companies have been relatively successful in replacing bad managers with better managers, but relatively unsuccessful at finding equivalent replacements for their top performing managers. We believe that regulators should therefore try to ensure that all efforts are made by fund management companies to inform all of their investors about a change in management