This paper is the first to relate the investment practices of U.S. equity mutual funds to their management of flow risk, defined as the adverse effect of investor in- and outflows on fund performance. Using a comprehensive merged sample of 2,585 actively managed U.S. domestic equity funds from...

We are the first to analyze bond mutual funds' permission and use of complex investment practices like derivatives, restricted securities and securities lending. Based on unique regulatory information from the SEC's N-SAR filings, we show that most complex investments do not affect fund...

We propose a novel Trade Motivation Matrix (TMM) that allows differentiating funds' valuation-motivated (VM) and liquidity-motivated (LM) trades on single trade level. It thus enables analyses of stock-picking skill on three levels: trade, stock, and fund. On trade level, we find significant...

Based on comprehensive regulatory data on equity mutual fund option use from the SEC's N-SAR filings, we are the first to present consistent evidence that equity funds' option use generates higher risk-adjusted performance. We further show that this is a direct effect of option use and not an...