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Short-Sale Constraints and the Pricing of Managerial Skills

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  • Massa, Massimo

Abstract

We investigate the impact of the absence of short selling on the pricing of managerial skills in the mutual fund industry. In the presence of divergent opinions regarding managerial skills, fund managers can strategically use fees to attract only the most optimistic capital. The recognition of this fee strategy helps explain a set of stylized observations and puzzles in the mutual fund industry, including the underperformance of active funds, the existence of flow convexity, and the negative correlation between gross-of-fee α and fees.

Suggested Citation

  • Massa, Massimo, 2015. "Short-Sale Constraints and the Pricing of Managerial Skills," CEPR Discussion Papers 10447, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10447
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    More about this item

    Keywords

    Managerial skills; Mutual funds; Short-sale constraint.;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • J0 - Labor and Demographic Economics - - General

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