This study analyzes the extent to which mutual funds purchase stocks based on their past returns as well as their tendency to exhibit 'herding' behavior (i.e., buying and selling the same stocks at the same time). The authors find that 77 percent of the mutual funds were 'momentum investors,'...

In this paper, option pricing theory is used to value and analyze many performance-based fee contracts that are currently in use. A potential problem with some of these contracts is that they may induce portfolio managers to adversely alter the risk of the portfolio they manage. This paper is...