I show that investors misallocate a substantial amount of capital in the active mutual fund industry. To this end, I develop a novel structural identification strategy to estimate the returns to scale in active management and the time-varying fund skills. A median fund is over-allocated by $29...

We examine the role of peer (e.g., Lipper indices) vs. pure (i.e., market indices) benchmarks in the compensation contract of mutual fund managers. We first model the impact of peer vs. pure benchmarks on fund manager incentives. Then, using a unique hand-collected dataset, we test the...

Using information on climate transition risks embedded in US equity mutual fund portfolios, we report evidence that mutual fund investors consider climate-related transition risk to be an undesirable fund feature and accordingly allocate more money to funds with lower climate-related transition...

In this study, we investigate the mutual fund managers' ability to time market coskewness. Analyzing nine investment styles of US equity fund, we find strong evidence to support that between 1973 and 2018, mutual fund managers investing in Small-Blend and Small-Growth schemes demonstrate the...

We provide the first in-depth examination of exchange-traded funds (ETFs) within actively managed mutual fund (AMMF) portfolios to better understand why AMMFs make substantial investments in passive ETFs. We examine the association between holding ETF positions and AMMF performance, as well as...

We present a framework for deciding when to choose an alternative to passively investing in capitalization-weighted indices within any particular asset class. Five reasons are identified for seeking an alternative. Three of these reflect situations where a capitalization-weighted index is either...

This study shows that mutual fund managers vary in their reliance on category-level information, relative to firm-specific information about assets. Moreover, fund performance decreases with managers' propensity to rely on categories. Fund managers display less skill in picking stocks which are...

This study proposes that the performance of mutual fund managers is linked to how efficiently they allocate attention across assets in their investment set. Motivated by existing models of optimal portfolio choice and rational inattention, we posit that the efficiency of attention allocation...

One of the major advantages of Equity mutual funds is that they allow retail investors to attain a diversified portfolio, which could not be easily obtained buying individual stocks. Our results indicate that mutual funds are not totally diversified; they hold a significant part of idiosyncratic...

This paper reports the results of a behavioural finance experiment on the ability of Thai individuals to make informed investment decisions under a defined contribution self-management option. Using an asset allocation dataset from members of the Thai Government Pension Fund (TGPF) and a control...