✦ LIBER ✦
Derivatives do affect mutual fund returns: Evidence from the financial crisis of 1998
✍ Scribed by Charles Cao; Eric Ghysels; Frank Hatheway
- Publisher
- John Wiley and Sons
- Year
- 2010
- Tongue
- English
- Weight
- 153 KB
- Volume
- 31
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
✦ Synopsis
Using a unique data set of detailed balance sheet information on mutual funds, we find that most mutual funds using derivatives do so to a very limited extent that has little discernable impact on returns. However, there exist two types of funds that make more extensive use of derivatives, global funds and specialized domestic equity funds. The risk and return characteristics of these two groups of funds are significantly different from funds employing derivatives sparingly or not at all. Fund managers time their use of derivatives in response to past returns.