Danyang Ge, with Tyler K. Jensen “How Does Mutual Fund Behavior Vary With Funding Conditions?” (Job Market Paper)
Abstract: This paper examines the relation between time-varying macroeconomic funding conditions and the behavior of mutual funds. Using a comprehensive dataset of actively-managed U.S. equity mutual funds, we find that fund flows, strategies and performance appear to dynamically respond to changing funding conditions. In particular, during periods of expansive funding conditions, funds attract greater fund flows, allocate more capital to illiquid assets and experience better performance on these more substantial illiquid holdings. These findings suggest that fund managers appear to have conditional skill in recognizing that certain return patterns related to stock characteristics are dependent on the prevailing funding environment.
Stage: Revise and Resubmit (Journal of Financial Research).
Danyang Ge, with Gjergji Cici, Zongrui Hu, and Paul Koch, “Mutual Fund Turnover, Mispricing, and Performance”
Abstract: Greater turnover amplifies the positive returns of skilled fund managers who hold underpriced stocks, and the negative returns of unskilled managers who hold overpriced stocks. That is, greater turnover translates into better performance for skilled (underpriced) funds, while it is associated with the recognition of worse performance for unskilled (overpriced) funds. This volume amplification effect is stronger during periods when there is higher investor sentiment or expansionary monetary policy, and for funds with outflows. Our results are robust when we account for alternative measures of fund managerial activeness and mispricing, and for other attributes including fund size and portfolio liquidity.
Stage: In preparation for submission (Target Journal: ABDC list A*)
Danyang Ge, with Tyler K. Jensen “Why Do Large Mutual Funds Exist? Funding Conditions and Decreasing Returns to Scale in the Mutual Fund Industry”
Abstract: Prior literature documents decreasing returns to scale in the mutual fund industry. These previous results suggest that after achieving critical mass, there are no benefits to the shareholders in achieving larger fund size, on average. In this paper, we explore a redeeming quality of large mutual funds, enhanced performance during certain macroeconomic environments. In particular, we find that decreasing returns to scale do not exist during periods of restrictive aggregate funding conditions. This distinction in performance appears linked to diversification, as large funds tend to diversify by adding more stocks to their portfolios, while small funds hold significantly fewer securities when aggregate funding constraints tighten. Overall, these findings suggest that the additional resources of large funds allow them to remain agile even when confronted with more challenging funding environments. We conclude that large mutual funds may exist, in part, because they provide resilience and consistency when aggregate liquidity is threatened.
Stage: Under review (Journal: ABDC list A).
Danyang Ge, with Scott E. Bokemper, and Tyler K. Jensen “Retirement Savings Behavior in the Gig Economy”
Abstract: Gig work represents a paradigm shift in the employer-employee relationship. This shift necessitates understanding savings behavior of the growing number of individuals with volatile income streams. We find that among workers who are actively saving, gig workers save a dramatically larger percentage of their income (36.62%) compared to workers who have never participated in the gig economy (14.02%). However, fewer gig workers expect to retire (30.22%) compared to workers outside the gig economy (54.45%). Additionally, although gig workers were more impacted by COVID-19 restrictions, they are less likely to increase future savings compared to non-gig workers. Finally, given a hypothetical positive(negative) income shock, gig workers are more likely to increase consumption (decrease retirement savings), compared to other workers. These results suggest that gig workers are more content with their savings decisions and more willing to access those savings, compared to workers in traditional careers.
Stage: Under review (Journal: ABDC list A).
Danyang Ge, with Xiaolu Wang, “Implied Stock Returns from Portfolio Holdings of Mutual Fund Managers”
Danyang Ge, with Zongrui Hu, Tyler K. Jensen, and Paul Koch, “Earnings Management and Data Privacy”