How are derivatives used? Evidence from the mutual fund industry

Article Abstract:

We investigate investment managers' use of derivatives by comparing return distributions for equity mutual funds that use and do not use derivatives. In contrast to public perception, derivative users have risk exposure and return performance that are similar to nonusers. We also analyze changes in fund risk in response to prior fund performance. Changes in risk are substantially less severe for funds using derivatives, consistent with the explanation that managers use derivatives to reduce the impact of performance on risk. We provide new evidence regarding the implications of cash flows and managerial gaming for the relation between performance and risk. (Reprinted by permission of the publisher.)

Investment Offices, Investment Companies, Open-End Investment Funds, Research, Risk (Economics), Derivatives (Financial instruments), Mutual fund industry

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Capital gains tax overhang and price pressure

Article Abstract:

A study that tells whether capital gains tax is an obstacle to selling is presented.

Massachusetts, Harvard, Massachusetts

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Market valuation of tax-timing options: evidence from capital gains distributions

Article Abstract:

The article examines the impact of capital gains tax on investors' stock portfolio.

United States, Securities issued, listed, Securities, Investors, Company securities, Corporate distributions

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