Vaneesha Boney’s research while affiliated with University of Denver and other places

Exchange Traded Funds (ETFs), including the innovative leveraged (long and inverse) types, and the ever more creative traditional versions, are accelerating in popularity as preferred investment and trading vehicles. Real estate, a major investment sector, has been made more accessible through these tools. This study investigates if the introduction of real estate ETFs is impacting the volatility of their underlying real estate stocks. Tests conclude that the introduction of leveraged (long and inverse) and traditional real estate and real estate related ETFs, linked to the Dow Jones US Real Estate and Financial Indices and the leveraged (long and inverse) ETFs, benchmarked to the Russell 1000 Financial Services Index, significantly increased the volatility in their component real estate stock prices. The leveraged ETFs tied to the Dow Jones US Real Estate and Financial Indices caused the highest volatility, approximately tripling the volatility in the underlying real estate securities. Traditional ETFs were second, causing slightly more than a 70% increase in volatility, while the leveraged ETFs linked to the Russell 1000 Financial Services Index, having induced a 50% increase in volatility, were third. The increased volatility could not be attributed to any other external event.

This paper demonstrates that the effects of unanticipated monetary policy changes (shocks) on REIT returns are asymmetric between the high- and low-variance regimes. We utilize a Markov regime-switching model with error correction terms to quantify the impact of monetary shocks on seven specialized REIT indices in a sample of daily returns from 1997 to 2008. The relationship between monetary shocks and REIT returns is negative, but this relationship is significant primarily during periods of high variance, namely the current recession and recent crisis events. Furthermore, monetary shocks have about twice as much effect on REITs as they do on the SP500 index during high-variance regimes. This asymmetric response can be attributed to the Fed’s recession avoidance tactics, downward price rigidity, and the external financing premium. Given their unique regulatory and operating characteristics, REITs are an important and independent test case for ongoing research into the impact of monetary shocks.

Bond funds report both a distribution yield and a SEC yield, which are roughly analogous to the current yield and yield to maturity on an individual bond. We analyze the quarterly yields reported by municipal bond funds from September 1993 to September 2009. Despite substantial variation in the reported yields, we find that the yields provide no information concerning the future risk adjusted performance of the funds. We do find that the yield gap, defined as the difference between the distribution and SEC yield, does serve as a reliable predictor of the funds that will have the worst future risk adjusted performance. However, we find no evidence that investors use this information to avoid selecting poorer performing funds.

We examine the ability of bond fund managers to shift assets between bonds and cash and across bonds of different maturities in order to capture the changes in their relative returns. As measured by estimated changes in portfolio allocations, we find strong evidence of perverse market timing ability between cash and investment grade securities, and our results indicate additional perverse timing across the bond maturity spectrum. Results are robust to an alternative performance metric. We present evidence that the survival of the majority of these funds despite their negative performance may reflect the value investors place on the portfolio diversification benefits of holding these funds.

We analyze 16 mutual funds that are self-proclaimed or media-identified disciples of behavioral finance to determine whether: (a) they successfully attract investment dollars and (b) their strategies earn abnormal returns for their investors. We find these funds are successfully attracting investment dollars, outperform S&P 500 index funds, load especially heavily on the HML factor, but fail to earn risk-adjusted abnormal returns. Our results suggest behavioral mutual funds are tantamount to value investing and not much more.

In the last few years public real estate vehicles and the REIT concept have expanded into many countries including the United Kingdom in January 2007 and Germany in March 2007. With more investment opportunities, many new international real estate investment funds have sprung up around the world. Therefore new investment strategies to help international real estate investors are needed. Much new research on international real estate returns and country correlations have been performed, but few if any new investment strategies have been developed. This paper looks at a long-term real estate return series collected by Global Property Research (GPR) and finds that the long-term correlations between the three continental regions - North America, Asia, and Europe - are relatively low, thus providing valuable return and diversification benefits. An active allocation strategy is developed for high, medium, and low volatility periods in each region. The findings indicate that investors could have received excess returns by adjusting their regional portfolio allocation weights during different volatility periods in each region.

Exchange traded funds (ETFs) mirror an existing index by holding the same component stocks and matching the weighting scheme. ETFs offer services and investment flexibility that indexed mutual funds generally do not. We expect that if ETFs offer additional benefits over index funds, such as intra-day and option trading, then certain investors should prefer ETFs, leading to a movement of investment dollars from indexed products to ETFs. We test this hypothesis by examining the flow of funds into and out of indexed mutual funds that track the S&P 500 and the ETF Spider. We find that the Spider has a significantly negative effect on the flow of funds of indexed mutual funds.

We examine the market timing performance of a sample of high quality corporate bond funds over the 1994-2003 time period. After establishing that the funds do engage in market timing activity, we find strong evidence of perverse market timing ability between cash and bonds and additional evidence of negative timing skill across bond maturities. A significant portion of the perverse timing ability that we detect across the fund sample is driven by the subset of funds with the highest expense ratios. Robustness tests suggest that our results reflect actual and not spurious timing ability. Overall, our results indicate that bond fund managers do not share the positive market timing ability of other groups of money managers that has been recently documented in the literature.

ABSTRACT: I have composed a three essay dissertation. I examine mutual and/or exchange traded funds in an attempt to give a deeper understanding of the interplay between our financial markets and fund investors, in order to: 1) determine the effects new products have on the market of existing and similar products and 2) determine whether investor perceptions and potential biases (as proxied by measures of investor sentiment) affect fundamental aspects of exchange traded funds (ETFs) and closed-end funds (CEFs). Specifically, this dissertation seeks to examine the impacts of the introduction of the ETF and determine whether there are significant effects on the creation and deletion activity common to ETFs and the market price deviations from net asset value per share (NAV) of REIT CEFs given various real estate market environments. Text (Electronic thesis) in PDF format. Mode of access: World Wide Web. Advisor: David Peterson, Florida State University, College of Business, Dept. of Finance. Title and description from dissertation home page (viewed Sept. 19, 2007). Document formatted into pages; contains viii, 99 pages. Thesis (Ph. D.)--Florida State University, 2007. Includes bibliographical references.