Portfolio Management Essay Example | Topics and Well Written Essays - 5250 words

Portfolio Management - Essay practice sessionSimilarly, agency models, such as those f Barry and Starks (1984), Starks (1987), Cohen and Starks (1988), and Golec (1988,1992) show that a mangers portfolio risk choices will partly reckon upon his or her risk-taking preferences because the volatility f a managers pay is affected by the portfolios performance. This studys statistical approach accounts for the position that performance, risk, and fees are interdependent.Mutual fund performance alone is an important and popular finance topic because coin positive risk-adjusted returns has implications for market efficiency. Most early studies, such as Jensen (1968) and Sharpe (1966), report that funds provide deficient performance partly because f management fees and other expenses. Recently, however, Ippolito (1989), Lee and Rahman (1990), Grinblatt and Titman (1989,1992), and Hendricks, Patel, and Zeckhauser (1993) show that mutual funds do-nothing generate systematic positive ris k-adjusted returns. Although Ippolitos sample f funds earned sufficient risk-adjusted returns to cover fees, Elton, Gruber, Das, and Hlavka (1993) enquiry Ippolitos methods and suggest that funds do not exhibit positive risk-adjusted returns.Whether mutual fund managers produce top-hole returns is controversial because most studies funds, sample periods, or performance measures are not comparable. Unlike earlier studies that attempt to determine if the average risk-adjusted fund performance is positive, this study only requires that a performance measure localize funds appropriately. For example, if longer tenure implies greater human capital which, in turn, generates better performance, then communication channel tenure should be positively related to performance. This positive relationship can be present notwithstanding if all funds hand negatively charged risk-adjusted performance long-tenured managers will simply have less negative performance. Earlier studies consider re latively long time periods during which some funds change managers, risk, fees or objective, or liquidate. Here, the cross-sectional data and shorter sample period reduce the degree f fund changes and survivorship bias (Brown, Goetzmann, Ibbotson, & Ross, 1992). The newsprint is organized as follows. Section I discusses the statistical procedure used to account for simultaneity and defines the studys endogenetic and exogenous variables. Section II describes the data. Section III presents from each one structural equation along with the results for each equation. Section IV considers the issues f survivorship bias and performance measurement. Section V summarizes the results that have the most fundamental implications for investors choice among mutual funds and their managers. Three-Stage Least Squares Many earlier studies, such as Sharpe (1966), Jensen (1968), Friend and Blume (1970), Ippolito (1989), Grinblatt and Titman (1989,1992), Hendricks, Patel, and Zeckhauser (1993) and Elton et al. (1993), comparison mutual funds risk-adjusted performance, as well as other endogenous variables (risk or fees), but ignore the fact that changes in performance, risk, and fees tend to impact each other contemporaneously. For example, a fund that increases fees will tend to have poorer performance, all else equal. In this case, fees