IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v25y2012i3p913-936.html
   My bibliography  Save this article

Mutual Fund Tournaments: The Sorting Bias and New Evidence

Author

Listed:
  • Christopher G. Schwarz

Abstract

Previous findings regarding the risk-shifting behavior of mid-year underperforming mutual fund managers are mixed. In this article, I show that this is due to a "sorting bias," which is caused by the sorting of first-half risk levels when establishing relative mid-year performance. Even without risk-shifting behavior, mean reversion of these sorted risk levels results in the detection of tournament behavior. After correcting for this bias, I find evidence supporting the hypothesis that first-half underperforming managers increase portfolio risk during the second half of the year and that this tournament behavior is not dependent on first-half market conditions. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Suggested Citation

  • Christopher G. Schwarz, 2012. "Mutual Fund Tournaments: The Sorting Bias and New Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 25(3), pages 913-936.
    • Handle: RePEc:oup:rfinst:v:25:y:2012:i:3:p:913-936
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rfs/hhr091
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:25:y:2012:i:3:p:913-936. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.