IFin Seminar, Thomas Andreas MAURER - HKU Business School "Tilting at Windmills: Biased Benchmarks and the Risk-Taking Response of Mutual Funds"
Istituto di finanza
Data: 19 dicembre 2024 / 12:25 - 13:40
Speaker: Thomas Andreas MAURER - HKU Business School
Title: "Tilting at Windmills: Biased Benchmarks and the Risk-Taking Response of Mutual Funds"
Date: December 19, 2024
Ore: 12:25 - 13:40
Room: Red Room (Executive Center)
Lugano West Campus
Abstract
Before the 2002 Morningstar ratings methodology change, we find that ranking all US domestic equity funds as a group disadvantages growth funds relative to value. In response, growth funds take significantly more risk. These results are more pronounced near ratings cutoffs and among funds with stronger incentives to attract investor flows. Greater risk-taking enables disadvantaged growth funds to generate returns comparable to advantaged value funds, mitigating the benchmark bias. Extending our analysis to socially responsible investing (SRI), we find similar patterns: morally constrained funds take greater risks to compete with advantaged peers that overweight sin stocks.