Competition in Sub-advised Mutual Funds

We study the effects of managerial turnover and competition on U.S.

sub-advised mutual funds (MFs), using changes of sub-advisors by 426 funds from January 1995 to December 2016. Sub-advised MFs exhibit return-chasing behaviour when making turnover decisions, but these changes neither improve subsequent fund returns and risk measures nor increase future flows into the fund. Using sub-advisor turnover to change the degree of competition among sub-advisors does not affect the performance of incumbent sub-advisors.

Overall, no evidence exists that fund families' sub-advisor selection decisions benefit the performance of sub-advised MFs. Outperforming sub-advisors with larger style drift are less likely to be hired, and the more a sub-advisor deviates from its investment mandate, the more likely it is to be fired.

Short selling is a financial transaction that allows investors to profit from a decline in an asset's price. It involves borrowing an asset, selling it, and later buying it back at a lower price. Short sellers are known for their ability to forecast underperformance (Cohen et al., 2007), rapidly process public information, and uncover private information (Karpoff & Lou, 2010). This paper investigates whether short sellers can profit from negative ESG (environmental, social, and governance) news and the firms associated with such news. We expect that short sellers will not only be able to anticipate negative ESG news long in advance, but also assess the news's importance and adjust their trading activities accordingly.

 We have started submitting the paper to top journals and conferences. View Latest Version here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4338441 

Project Update - April 2025

Project Update - April 2024