TITLE:
An Empirical Study of Fund Performance Ranking on Fund Manager’s Risk Adjustment Behavior
AUTHORS:
Qian Mu
KEYWORDS:
Fund Manager Performance Ranking Risk Adjusting Behavior
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.8 No.1,
January
8,
2020
ABSTRACT: Performance ranking is a key factor for investors to make investment decisions
such as redemption. Numerous studies have shown that in order to improve and
secure the year-end relative performance ranking, mid-year performance rankings
have prompted fund managers ranked at different mid-year levels to adjust the
risk levels of their portfolios to varying degrees in the second half of the
year. This study is of great significance to improve the incentive mechanism of
fund companies, investor investment activities and the performance of
regulatory responsibilities by state institutions. First of
all, this paper makes a full sample study of the risk adjustment behavior of
fund manager based on the fund’s first-half performance by using the
combination table analysis method and regression analysis method, and further
studies the relationship between market state and fund manager’s risk
adjustment behavior. Result: Fund managers (losers) with lower mid-year
performance increase portfolio risk more than fund managers (winners) who are
at the top of the mid-year performance list. Finally, pay incentives dominate
in a bull market, prompting fund managers to increase the risk of their
portfolios in the second half of the year in the event of a lower first-half
performance ranking, while career worries can have the opposite effect of
performance rankings in a bear market.