Essays in Mutual Fund Research

In my doctoral thesis, I demonstrate i) how the demand and supply side respond to the (first time) availability of product information for mutual funds and ii) how actions and personal characteristics of portfolio managers impact investors and fund management. Essays (1) and (2) extend the scarce evidence on the utility of investor information disclosure by means of a comprehensive investigation into the disclosure practices of the mutual fund industry. Using product information with different degrees of salience and obligation, ranging from comprehensive mandatory pre-contractual product information to complementary fund characteristics only disclosed by selective players, the essays document the importance of thoroughly written and designed information. Specifically, on the demand side, I analyze i) whether retail investors can understand mutual fund product information and ii) if investors are able to benefit from novel disclosure initiatives. Moreover, on the supply side, I show if and to what extent mutual fund companies react to novel disclosure regulations. Essays (3) and (4) shift the focus towards the individuals in charge of managing retail investors’ money, i.e. the portfolio managers, analyzing the impact of incentive mechanisms and personality traits on fund management and investor behavior. The overarching contribution of my research is threefold. First, by addressing information salience and understandability, I shed light on retail investor limitations not explained by the classical efficient market framework assuming investors to be fully rational utility-maximizing decision-makers (e.g., Fama 1970). Thus, my research adds to the rich behavioral finance literature dealing with cognitive capacity and information processing constraints (e.g., Kozup et al. 2012, Agnew and Szykman 2005). Second, by analyzing investor behavior from an objective point of view, I contribute to the understanding of determinants which affect flows of mutual fund investor (e.g., Sirri and Tufano 1998, Barber et al. 2005). Third, methodically my research adds to the quantification of qualitative data in the finance domain (e.g., Loughran and McDonald 2016, 2019) by applying advanced textual analytics (essays (1), (3) and (4)), allowing to investigate large samples of written (verbal) information. How do policy makers help consumers make sound investment decisions? Regulations which require disclosure of information are among the most ubiquitous interventions in investor protection. The popularity of mandatory information disclosure follows standard economic theory which suggests that disclosure can help avoid instances of market failure in situations characterized by asymmetric information and a risk of misaligned incentives (e.g., Akerlof 1970, Ross 1973). However, although broadly advocated as an appropriate policy measure, there is a paucity of data supporting the efficiency of mandatory information disclosure. For example, individuals’ information processing abilities have been shown to be limited and, thus, the increasing extent of mandatory information likely leads to an ‘information overload’, where the marginal utility of information for the decision-maker becomes negative (e.g., Eppler and Mengis 2004). In my dissertation, I focus on investor information disclosed by actively managed equity mutual funds, since holdings in this asset class represent the by far largest fraction of household investments: in 2017, worldwide retail assets under management by equity mutual funds totaled at $21.8 trillion with the large majority being actively managed (Investment Company Institute 2018). Moreover, disclosure requirements are pervasive for fund companies and the market is a prime candidate for unintended consequences of mandatory disclosure such as information overload: investors face a dizzying number of product options and each product carries a host of characteristics, which should be considered in order to make an informed decision. Especially when investing in an actively managed mutual fund which is tantamount to delegating the management of a securities portfolio. I investigate four types of investor information which regulatory authorities have qualified as decision-relevant when it comes to this delegation task. First and foremost, investor should understand the fund’s key features. For this to be the case, mandatory product information has to be easy to understand for the average investor (essay 1). The introduction of Key Investor Information Documents (KIIDs) for mutual funds in the European Union is the regulator’s response to the quest for a more comprehensible description of the essential product features and we examine if these documents live up to their purpose. Following Loughran and McDonald (2014), we assess the comprehensibility and regulatory compliance of KIIDs and thereby extend the scarce academic evidence on the importance of product information documents (e.g., Habschick et al. 2012, Oehler et al. 2014, Walther 2015). We use a comprehensive sample of roughly 38,000 product information documents for mutual funds pre and post the introduction of KIIDs to capture the regulations impact on fund information comprehensibility. We find that while mutual fund product information remains difficult to read requiring on average 13 years of formal education from readers, textual readability significantly improved with the introduction of KIIDs. Furthermore, we show that the introduction of KIIDs translated into a ‘clearer’ writing style. By contrast, we detect that the relative usage of financial jargon increased in the new short form disclosure document. Moreover, the improvement on readability and the significant reduction in length seem to be achieved at the expense of an appealing font. Only half of the KIIDs comply with regulators’ guidelines on font type and size. Taken together, we document mixed results on the regulations’ effectiveness in creating clear and comprehensible pre-contractual information that enable retail investor to read and understand those documents. Second, unlike index funds, actively managed funds sell the potential to beat their benchmark (usually a market index) and investors who select this type of mutual fund are typically looking for an opportunity to outperform the market index. However, actively managed funds usually charge significantly higher fees than passive funds (e.g., Morningstar 2018). This cost difference may be justified by the fund manager’s effort to manage the portfolio in a way which creates an opportunity to generate excess returns. Thus, assessing the fees charged by an actively managed fund in light of the actual level of activeness is a worthwhile screening exercise for investors: prior literature documents substantial underperformance for funds with low levels of activeness (e.g., Petajisto 2013, Cremers et al. 2016, Cremers and Pareek 2016). However, and even though fund companies employ Active Share (AS) , a metric to capture the degree to which a fund deviates from its benchmark, for a variety of purposes and provide AS information to institutional investors, they did not disclose it to retail investors and were not required to do so by regulators. The lack of equal access to AS information can be regarded as an information asymmetry, which prevents retail investors from fully evaluating the potential value proposition of an actively managed equity fund. Consequently, the New York Attorney General (NYOAG) revealed dubious index-hugging practices and unequal access to AS information for several of the largest US mutual funds and subsequently imposed disclosure of AS on them (NYOAG 2018). We make use of this unique intervention and thereby extend the few existing studies on funds’ activeness (essay 2). In particular, we are the first to demonstrate if and how individual investors react to AS information once they (can) learn about it. We find that retail investors strongly respond to the NYOAG intervention, but not in the way intended by the regulators. We document a significant increase in investor flows into funds of fund companies affected by the intervention. The effect is most pronounced in the days after the intervention became public. However, rather than ‘rationally’ re-allocating assets away from ‘high fee/low activeness’ and into truly actively managed funds, investors are subject to a media attention bias. Fund companies that are prominently covered in the press following the disclosure intervention experience high net inflows, irrespective of the degree of AS. These findings are hard to square with the notion that retail investors have understood the concept behind AS and rationally traded on this newly available information. On the supply side, we do not observe a change in portfolio management habits following the intervention. Even for funds with the lowest AS levels—i.e. arguably those funds with the highest pressure to act in an attempt to legitimate ‘active’ fees—we do not observe any measurable effort to increase AS post-intervention. In sum, our evaluation of the NYOAG intervention documents a number of unintended consequences and reveals substantial limits to the effectiveness of this disclosure initiative. Third, investors face ongoing uncertainty about the standard of care fund managers exercise when managing their savings and whether they act in their best interest. Following the rationale "(…) that a portfolio manager's ownership of a fund provides a direct indication of his or her alignment with the interests of shareholders in that fund" (SEC 2004, section II, part D), managers of US mutual funds are required to disclose the amount of their private investments in all funds they manage. However, information about the beneficial holdings of portfolio managers (their skin-in-the-game) is far from readily accessible for the average retail investor. Instead, managers’ private investments are disclosed in a supplementary fund information document that is only provided upon request and, at best, can be considered a secondary source for the average investor. Yet, interestingly, fund managers regularly use another medium to voluntarily disclose skin-in-the-game to their investors: the Letter to the Shareholder (LS). The LS is a non-mandatory–however commonly enclosed–component of the mutual fund's semi-annual or annual report. It is typically authored by the fund management, addresses the fund shareholders directly and thus constitutes a key element in communication with their shareholders (e.g., Hillert et al. 2016, Chu and Kim 2019). Unlike prior studies (e.g., Khorana et al. 2007, Ma et al. 2019, Evans 2008, Ibert 2018), who find that funds with managerial ownership yield higher risk-adjusted returns, I exploit verbal signaling of the managers in the LS to analyze aggregate investor fund flows applying advanced textual analytics (essay 3). With this, I contribute to prior research on the effects of fund manager skin-in-the-game by observing how retail investors respond to their managers’ signaling activities. I find that signaling of skin-in-the-game in the LS triggers substantial net inflows from retail investors. The effect is most sizeable in the days after investors receive the LS and persistent throughout time. On the other side, I show that retail investors’ asset allocation is unaltered by the actual amount invested by fund managers –an information the average retail investors most probable is unable (or unwilling) to find. Finally, I document that signaling of fund managers in the LS affects only retail investors. Professional investors, on the other hand, regularly have access to licensed fund data providers and potentially can easily obtain valuable information on fund manager investments. Fourth and lastly, we explore the consequences of a well-researched personality trait –narcissism– on fund managers’ portfolio management. Unlike ‘hard facts’ of a fund, such as past performance, cost or investment style, investors do know little about their fund managers personality. Yet, looking into the literature on corporate managers (e.g., Chatterjee and Hambrick 2007, Kumar and Goyal 2015, Aktas et al. 2016), personality traits might also affect the job of fund managers. Applying text-mining techniques on verbatim fund manager interviews retrieved from The Wall Street Transcript, we find that narcissism is even more severe among professional fund managers than in the corporate context. We show that narcissistic fund managers are significantly more likely to deviate from their advertised investment style. Moreover, we document that while the realized performance of narcissistic fund manager is virtually identical to their non-narcissistic counterparts, we find that they exhibit a worse risk-return profile. Furthermore, we identify that large funds, i.e. those associated with higher compensation and prestige in the business, are more often managed by narcissistic managers, which is in line with prior literature documenting ‘empire-building’ behavior of narcissists. Given our evidence pointing to a rather negative relation of narcissism on portfolio management, we would expect investors to refrain investing with a narcissistic manager. However, we find that this is not the case. Most probable, investors do not know about personal traits of their fund managers and consequently are unable to act upon this information. Taken together, the findings of my essays stress the importance of salient information disclosure in order for retail investors to arrive at a wise investment decision. The empirical evidence provided highlights certain shortcoming in current disclosure practices and regulations. Essay (1) indicates that summary product information accompanied by formatting and language guidelines are a first step in the right direction to ensure investors comprehensibility of product information for mutual funds. However, we still detect linguistic barriers that potentially prevent investors from reading and understanding relevant product characteristics. Essay (2) provides insights on the effect of a non-standardized information disclosure intervention. As can be inferred from investors’ (non-) response to the availability of information on funds’ activeness, we observe that local interventions that address information asymmetries and therefore should benefit retail investors decision making, proof almost inefficient when not requiring a standardized, comparable and well-thought through information layout. Essay (3) supports this notion in documenting a prevalent mismatch between information availability and information usage. Finally, essay (4) points on the importance of personality traits. For retail investors it might be important to know more about the character of their fund managers given the evidence that personality traits, such as narcissism, affect day-to-day portfolio management. In sum, decision relevant information for investors, from the explanation of funds’ investment style in the prospectus (essay 1), funds’ ‘true’ degree of activeness (essay 2), an indication of manager private wealth investment (essay 3) or hints on the managers personality (essay 4), remains useless as long as the understandability, salience and transparency of disclosure stays low

The Path to a Bachelor’s Degree: The Effect of Starting at a Community College

Community colleges are increasingly important in the postsecondary landscape as close to twenty states have enacted free community college plans to help alleviate rising college costs. I analyze the effect of community college enrollment on bachelor’s degree attainment among United States students, utilizing propensity score matching to address bias. Relative to students who started at open access four-year colleges, those who started at community colleges were 10% less likely to earn a bachelor’s degree. Further, the community college penalty disproportionately impacts upper middle-income students, Hispanics, and students with weaker academic backgrounds, thus widening the attainment gap among some demographics

Plant cell technologies in space: Background, strategies and prospects

An attempt is made to summarize work in plant cell technologies in space. The evolution of concepts and the general principles of plant tissue culture are discussed. The potential for production of high value secondary products by plant cells and differentiated tissue in automated, precisely controlled bioreactors is discussed. The general course of the development of the literature on plant tissue culture is highlighted

Who Really Controls Haiti\u27s Destiny? An examination of Haiti\u27s Historical Underdevelopment, Endless Poverty, and the Role played by Non-Governmental Organizations (NGOs)

The presence of NGOs and development agencies is often considered an apolitical phenomenon, and that the very presence of NGOs within a country is a symbol of a global humanity in action; in short, NGOs equal charity which equals good work. Unfortunately, the reality is often much more complicated as NGOs can also be found to be self-serving, anti-democratic and strictly in pursuit of their next funding source. In this thesis I advance the central hypothesis that the international community’s continued pursuit of an NGO-led neoliberal economic development model has systematically failed to contribute to the sustainable development of Haiti because they pursue the wrongs means of achieving poverty alleviation goals. Throughout its history, Haiti has continuously been caught between the aspirations of its people and the legacy of foreign interventions. The recent trend of implementing neoliberal development goals and strategies, supported and executed by NGOs, has focused on the promotion of economic growth as a means to eradicate poverty. However, this strategy is an ineffective method at producing positive changes in well-being, the economy, or the environment (Edmonds, 2010; Shamsie, 2012). I argue that the relationship between NGOs and their donors continuously undermines the Haitian’s right to self-sufficiency that would lead to self-determination and enable the Haitian people to control their own destiny. A new approach for addressing extreme poverty in Haiti must be rooted in a different set of values and beliefs; a different outlook that puts morality, humanity, equality and the environment at the forefront. A new development path that is not based on a growth economy but focused on human well-being and environmental conservation. NGOs will need to enact increasingly participatory and transparent practices that allows for a development path that can regulated and determined by the Haitians themselves

A risk governance approach to managing antitrust risks in the banking industry

Competition law compliance has become increasingly important in the banking industry as the number of infringements and the associated fines imposed by the European Commission are rising. This article shows that not only governments and regulators, but also shareholders and managers, should be interested in managing antitrust risks in banks in order to avoid competition law infringements. Therefore, this article sets out an approach to assessing the residual risk of antitrust non-compliance as well as the costs associated with such conduct, in order to be able to identify the required intensity of risk management activities. It also shows how antitrust risk management can be implemented in banks’ governance structures using the Three Lines of Defence model and the COSO ERM framework. As a result, it demonstratesn how to integrate antitrust risk management activities into existing structures and processes, thus improving the efficiency and effectiveness of overall risk management, in particular antitrust risk management

Die Übersetzung Verbaler Phraseologischer Einheiten vom Deutschen ins Spanische und Viceversa

En el presente artículo se aboga por una traductología no prescriptiva, dedicada a la observación de los hechos, en este caso la traducción real de unidades fraseológicas. A diferencia de una comparación en el sistema (langue), que suele comparar sólo fraseologismos con fraseologismos, la comparación de traducciones reales (parole) revela un abanico mucho más amplio de posibilidades de traducción, a la vez que detecta las dificultades que se puedan presentar a la hora de traducir dichas unidades. Se averigua que la traducción no fraseológica es la que prevalece numéricamente lo que indica la falta de obras de consulta adecuadas, laguna que se está llenando en los últimos tiempos.In this paper, we want to show that the science of translation has to be less prescriptive than it is, but has to observe facts, in this case real translations of phraseological units. On the other hand, the comparison not between facts of the system (langue), but of the discourse (parole) reveals a wide range of possible translations. At the same time, it allows to see the difficulties in this special translation problem. As a result, the non-phraseological translation seems to be the greater in number, probably because of a lack of specific dictionaries, which has become to be filled recently

Economic Evaluation of Catch Share Program: Rhode Island Fluke Fishery Sector Pilot Program

Catch share, sector allocation, fishery management, Demand and Price Analysis, Resource /Energy Economics and Policy, Q22, Q28,

BlockChain Technology and the Future of Video Games, Is Presence still Relevant?

BlockChain technology has grown exponentially over the last several decades. Early on, cryptocurrency presented a substitute for hard currency as a way to purchase goods and services. Recently, cryptocurrency has entered the video game world. How cryptocurrency, which has value outside of a video game, may impact the virtual reality world, is an open question. Presence, or the state of being in an environment, will be affected by the ability to escape within video games as cryptocurrencies are used. As video games often provide a place to escape the real world, bringing the real world into the game may have negative impacts. On the other hand, cryptocurrency brings with it another dimension. Video games are more and more realistic and including currency that has value in and outside of the game increases the realistic nature of the game. The way in which the inclusion of cryptocurrencies is marketed will have an important effect on the trajectory it takes. The blurred lines between reality and virtual will only continue to grow, and the effect on video games remain unclear

An Analysis of Fishing Selectivity for Northeast US Multispecies Bottom Trawlers

Observed production sets in multispecies fisheries are affected by regulatory incentives influencing spatiotemporal fishing decisions. Rights-based output controls can promote selective fishing; however, this ability may be limited and insufficient in achieving full utilization of catch quotas. We measure fishing selectivity for bottom trawlers catching federally regulated groundfish in the Gulf of Maine and Georges Bank before and after the introduction of rights-based output controls. Directional distance functions are applied to tow-level catch data collected by fishery observers to construct a measure of selectivity equal to the difference between strong and weak output disposal efficient production frontiers. Quantile regressions are then used to estimate the change inmedian selectivity associatedwith the introduction of catch sharemanagement, controlling for spatial, temporal, and individual factors.Asignificant improvement in selectivity was found for tows in Georges Bank following the 2010 management change, though production is still largely characterized by imperfect selectivity

Systematic Analysis of Gene Expression Differences between Left and Right Atria in Different Mouse Strains and in Human Atrial Tissue

Background: Normal development of the atria requires left-right differentiation during embryonic development. Reduced expression of Pitx2c (paired-like homeodomain transcription factor 2, isoform c), a key regulator of left-right asymmetry, has recently been linked to atrial fibrillation. We therefore systematically studied the molecular composition of left and right atrial tissue in adult murine and human atria. Methods: We compared left and right atrial gene expression in healthy, adult mice of different strains and ages by employing whole genome array analyses on freshly frozen atrial tissue. Selected genes with enriched expression in either atrium were validated by RT-qPCR and Western blot in further animals and in shock-frozen left and right atrial appendages of patients undergoing open heart surgery. Results: We identified 77 genes with preferential expression in one atrium that were common in all strains and age groups analysed. Independent of strain and age, Pitx2c was the gene with the highest enrichment in left atrium, while Bmp10, a member of the TGFb family, showed highest enrichment in right atrium. These differences were validated by RT-qPCR in murine and human tissue. Western blot showed a 2-fold left-right concentration gradient in PITX2 protein in adult human atria. Several of the genes and gene groups enriched in left atria have a known biological role for maintenance of healthy physiology, specifically the prevention of atrial pathologies involved in atrial fibrillation, including membrane electrophysiology, metabolic cellular function, and regulation of inflammatory processes. Comparison of the array datasets with published array analyses in heterozygous Pitx2c+/2 atria suggested that approximately half of the genes with left-sided enrichment are regulated by Pitx2c. Conclusions: Our study reveals systematic differences between left and right atrial gene expression and supports the hypothesis that Pitx2c has a functional role in maintaining ‘‘leftness’’ in the atrium in adult murine and human hearts