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ABSTRACT: We study the performance reaction of investors in a specific small market context. Our sample includes all Portuguese open-end
equity funds that invested in stocks issued by Portuguese companies in the period December 1993–June 2009. Instead of the
convex flow–performance relationship usually documented for the US, we find an absence of reaction to past performance. We
find no evidence to support the “smart money effect”, given that capital flows do not favour next period performance winners.
We also document persistence of fund flows. Our results are consistent with the idea that large financial intermediaries have
the capacity “to drive” their customers to funds with larger fees.
KeywordsMutual fund–Performance reaction–Investor behaviour–Small markets and regulation
Portuguese Economic Journal 04/2012; 10(2):129-147. · 0.12 Impact Factor
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ABSTRACT: The potential manager-investor conflict of interests in mutual funds is a classic agency problem. Using a database from Portugal, we show that mutual funds tend to overweight the stocks issued by their parent and underweigh the stocks of competitors. This cannot be explained by performance, risk, securities' characteristics or information advantage; funds invest in the stock of their parent company especially when there is widespread selling, and avoid selling them when the stock is experiencing low performance. This agency relationship is costly for fund investors: compared with the competitor's stock, the parent's stock underperforms after being acquired by the fund.
Applied Financial Economics. 01/2010; 20(16):1309-1320.
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ABSTRACT: The absence of investor reaction to the poor performance of mutual funds is a widely reported phenomenon. This article investigates the role of load costs as an explanation for the phenomenon and concludes that back-end load fees are an obstacle to reaction. We found evidence consistent with the hypothesis that medium and long-term investors do not react to poor performances due to the fact that they are 'imprisoned' by back-end load fees.
Applied Financial Economics. 01/2007; 17(16):1301-1312.
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ABSTRACT: Institutional investors manage an increasingly substantial share of securities in the developed markets. Previous research has concluded that mutual funds’ clients do have asymmetric reactions, for they increase capital flows to mutual funds that are winners in performance, but fail to move away from performance losers. Such an asymmetric behavior gives the mutual fund manager the opportunity to optimize the fund’s own interests, not the participants’. In this paper we investigate self-interest on Portuguese equity mutual fund management. Our results show that, in Portugal, mutual funds tend to exhibit biased portfolios, i.e., financial assets of the group’s parent company outweigh other financial asset holdings. This cannot be explained by performance, risk or securities' characteristics, and is consistent with the hypothesis of the existence of self-interest on mutual fund management.
12/2004;
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ABSTRACT: Several supervisory authorities and governmental working groups issued corporate governance best practice codes for listed companies during the nineties. In this paper, we used a unique database that allowed us to analyse the relationship between the level of compliance of the code of best practice issued by the Portuguese Securities Market Commission and the returns of the concerned companies. By using a multifactor model, one can conclude that there is a positive relationship between the compliance of some of these recommendations and the returns that were determined. The recommendations on the structure and functioning of the executive board deserve a special attention. However, globally, CMVM's code of best practice doesn't have a systematic effect on firm returns. Copyright Blackwell Publishing Ltd. 2004.
Corporate Governance An International Review 01/2004; 12(3):290-301. · 1.90 Impact Factor
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ABSTRACT: Several supervisory authorities and governmental working groups issued recommendations on corporate governance for listed companies during the nineties. In this paper, we used a unique database that allowed us to analyse the relationship between the level of compliance of the recommendations issued by the Portuguese Securities Market Commission and the (abnormal) returns of the concerned companies. By using a multifactor model, one can conclude that there is a positive relationship between the compliance of some of these recommendations and the abnormal returns that were determined. The recommendations on the structure and functioning of the executive board deserve a special attention.
01/2002;
