empirical investigation of the risk taking behavior of mutual fund managers indicates that managerial risk taking crucially …, fund managers with a poor midyear performance tend to decrease risk relative to leading managers to prevent potential job … loss. When employment risk is low, compensation incentives become more relevant and fund managers with a poor midyear …

We develop a unified model of the interactions among investors, fund companies and fund managers. We show that the …-performing (under-performing) managers are less (more) likely to be fired in the future, and are also more likely to increase relative … mutual fund managers, we find strong support for the hypothesized U-shaped relation between relative risk and prior …