My name is Jeffrey Stark and I am an Assistant Professor of Finance at Middle Tennessee State University in Murfreesboro, TN. In 2008 I earned my B.S. from Canisius College in Buffalo, NY, in 2010 I earned by MBA from SUNY Binghamton in Binghamton, NY, and in 2014 I earned by Ph.D. in Finance from Southern Illinois University Carbondale in Carbondale, IL. I currently reside in Murfreesboro, TN with my wife.
My research interests include asset pricing and mutual fund performance with a specific focus on the spread of financial information, how mutual funds make investment decisions, and the role of exchange-traded products.
Sherrill, D. E., and Stark, J. R. (2018), "ETF liquidation determinants" Journal of Empirical Finance 48, 357-373.
Sherrill, D. E., Shirley, S. E., and Stark, J. R. (2017), "Actively managed mutual funds holding passive investments: What do ETF positions tell us about mutual fund ability?" Journal of Banking and Finance 76, 46-64.
Rakowski, D., Shirley, S. E., and Stark, J. R. (2017), "Tail-risk hedging, dividend chasing, and investment constrains: The use of exchange traded notes by mutual funds" Journal of Empirical Finance 44, 91-107.
Shirley, S. E., and Stark, J. R. (2016), "Why do fund families release underperforming incubated mutual funds?" Financial Management 45, 507-528.
- Lead Article
Sherrill, D. E., Shirley, S. E., and Stark, J. R. (2016), "ETFs within a mutual fund's portfolio" Journal of Index Investing 7, 6-15.
- Lead Article
Select Working Papers:
"Is all that twitters gold? Social media attention and stock returns" (with David Rakowski and Sara E. Shirley)
Abstract: We show that increased investor attention, as measured by changes in Twitter activity, leads to greater stock visibility, noise trading, and temporary return spikes. These effects are concentrated among smaller, hard to arbitrage stocks, with greater individual ownership. Furthermore, a trading strategy based on the Twitter relationship generates annual excess returns of 58.10 percent. Under the right conditions, increased Twitter activity also stimulates the spread of fundamental news to a wider audience. When news stories about small firms occur in conjunction with an increase in Twitter activity, the following day’s permanent stock return impact nearly doubles, and is consistent with a reduction of informational asymmetries.
"Capture Ratios: The ability to capture up market returns and avoid down market losses" (with Timothy Marlo)
Abstract: We examine the Upside and Downside Capture Ratios, which distinguish between mutual funds that better capture returns in up markets and better reduce losses in down markets. We find strong evidence that the Upside Capture Ratio successfully identifies mutual funds that subsequently outperform in up markets, even after controlling for the level of risk taking. We further show that mutual fund flows are positively associated with Upside and negatively associated with Downside Capture Ratios. This relationship indicates that investors utilize Capture Ratios to engage in a form of market timing through their mutual fund allocation decisions.
"Foreign equity mutual funds and exchanged traded fund positions: Do they possess skill?" (with D. Eli Sherrill and Sara E. Shirley)
Abstract: We show that approximately one third of actively managed foreign equity mutual funds hold exchange traded funds (ETFs). We find evidence that mutual funds with ETF positions underperform mutual funds that have never held an ETF, and these funds exhibit a further decrease in performance during months they hold an ETF relative to months they do not. Despite underperforming, we find that ETF positions indicate an improved ability to manage large inflows and outflows, thus providing a benefit to investors. Finally, we show that mutual funds tend to hold ETFs in anticipation of, and in response to large flows, indicating that they may strategically hold ETF positions to mitigate flow risk.
"The determinants of ETF use by actively managed mutual funds" (with D. Eli Sherrill and Sara E. Shirley)
Abstract: An actively managed mutual fund is, by definition, supposed to actively manage their assets. This traditionally means that a mutual fund selects stocks that should outperform the market. We show that many mutual funds take substantial positions in passively managed ETFs and index mutual funds. Mutual funds take large ETF and index mutual fund positions outside of their investment objective when performance is poor, stock portfolios are concentrated among industries, and when portfolio differentiation is most important. Meanwhile, small positions within a mutual fund’s investment objective are associated with large inflows and higher returns. These differences indicate that the motivations for taking large or small positions within and outside of a mutual fund’s investment objective greatly differ, but are still part of an overall active investment strategy.
"Decomposing mutual fund alpha into security selection and security weighting" (available by request)
Abstract: I decompose mutual fund alpha into two distinct components: which stocks a mutual fund selects and what weights are placed in those stocks. Although related, each decision has a unique and distinguishable impact on portfolio alpha. My results show that deciding how to weight securities is of greater importance than deciding which securities to select. I also find that the ability to successfully weight securities persists up to eight months, while the ability to select securities lasts for only one. Finally, I show that mutual funds with skill in both areas generate the largest alphas and display long-term outperformance.