Mutual fund volatility timing and management fees

Erasmo Giambona () and Joseph Golec

Journal of Banking & Finance, 2009, vol. 33, issue 4, 589-599

Abstract: This paper shows that compensation incentives partly drive fund managers' market volatility timing strategies. Larger incentive management fees lead to less counter-cyclical or more pro-cyclical volatility timing. But fund styles or aggregate fund flows could also account for this relation; therefore, we control for them and find that the relation between fees and volatility timing still holds. Results show that less aggressive fund styles are associated with pro-cyclical volatility timing, and that volatility timing and flow timing are negatively related. We also find that pro-cyclical timing mostly improves funds' average excess returns, Sharpe ratios, and alphas.

Keywords: Volatility; timing; Mutual; fund; Management; fees (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:4:p:589-599

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