Published in:Swedish House of Finance Research Paper ; No. 21-18
Extent:
1 Online-Ressource (61 p)
Language:
English
DOI:
10.2139/ssrn.3920863
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 18, 2021 erstellt
Description:
We study a dynamic equilibrium model of mutual fund investing under career concerns that features investment opportunities at different horizons. Equilibrium returns are endogenously determined by competition. Short-term investment strategies can benefit fund managers by accelerating skill revelation, while the downside risk is managed by manager exit. In the steady state, a large number of new and unskilled managers exploit the value of this call option, driving down short-term excess returns. A small number of experienced and skilled managers exploit scalable long-term investment opportunities, adding substantial value. We empirically confirm our theoretical predictions using US mutual fund data