We provide a rationale for window dressing where investors respond to conflicting signals of managerial ability inferred from a fund's performance and disclosed portfolio holdings. We contend that window dressers take a risky bet on their performance during a reporting delay period, which...

This paper introduces two measures to investigate potential window-dressing behavior among mutual fund managers. We show that unskilled managers that perform poorly are more likely to window dress by strategically purchasing winner stocks and selling loser stocks near quarter ends. Further,...

We introduce a conditional measure of skill, the correlation between a funds' residual trades, net of common trading motives, and future news about the stocks traded. Using this measure, we show that the average mutual fund manager in the cross-section has stock-picking skill. This result is...

We propose that investor beliefs frequently “cross” in the sense that an investor may like company A, but dislike company B, while another investor may like company B, but dislike company A. Belief-crossing makes it almost impossible to construct a portfolio that is comprised solely of every...

Purpose: Retail investors use information provided by mutual fund rating agencies to make investment decisions. This paper examines whether the ratings provide useful information to retail investors by analyzing the rating migration and closure risk of mutual funds that received Morningstar's...

Funds of Hedge Funds (FHF) are perceived to be the premier choice of institutional investors for first-time allocations into the alternative investment asset class. While many papers cover the bright side of FHF investing, we in this paper empirically investigate the maximum drawdowns of FHF....

Using a large sample of institutional investors' investments in private equity funds raised between 1991 and 2011, we estimate the extent to which investors' skill affects their returns. Bootstrap analyses show that the variance of actual performance is higher than would be expected by chance,...

This paper uses proprietary data from a leading intermediary to understand the magnitude and determinants of transaction costs in the secondary market for private equity stakes. Most transactions occur at a discount to net asset value. Buyers average an annualized public market equivalent of...

This paper focuses on funds of funds (FOFs) as a form of financial intermediation in private equity (both buyout and venture capital). After accounting for fees, FOFs provide returns equal to or above public market indices for both buyout and venture capital. While FOFs focusing on buyouts...

This paper investigates the purchases and redemptions of a large cross-sectional sample of German equity funds. We find that investors punish bad performance by selling their shares, but also have a tendency to sell winners. Investors in large fund families show higher sales and redemption...