Essays on Mutual Funds

Pramodkumar Yadav, Department of Finance will be defending his Dissertation defense titled, “Essays on Mutual Funds” on 8/16/2021.

The time and location of his dissertation defense is 9 AM—10:30 AM on Zoom.

Many thanks to Pramodkumar’s dissertation committee:

• Committee Chair – Daniel Dorn – Associate Professor – Drexel University
• Committee Member: Naveen Daniel – Associate Professor – Drexel University
• Committee Member Michelle Lowry - Professor – Drexel University
• Committee Member: Gregory Nini– Associate Professor – Drexel University
• Committee Member: Gjergji Cici – Professor – University of Kansas

Abstract:

Using data on investments of fund family employees in their 401(k) plans, I show that employee flows predict fund performance up to two years. Moreover, employee flows lead flows of other investors, but not vice versa, further indicating that employee flows are smart. The predictive power of employee flows is stronger when fund family employees are located close to fund managers, pointing to employees exploiting their proximity to managers to learn about the managers’ skill or effort. The results do not appear to be driven by ownership changes of portfolio managers themselves, family cross-subsidization efforts, plan design, or employee sophistication.

Relative to solo-managed mutual funds, team funds have a greater propensity to sell winners and hold losers. This propensity is costly as winners sold outperform losers held by 50bp during the next quarter in terms of DGTW Alpha. Disposition effects are strongest in positions that were initiated by a subset of the team who thus bears particular responsibility. In contrast, there is no disposition effect in positions that were initiated by all team members together. This suggests that the difficulty of admitting mistakes to peers (vanity), rather than conformity to in-group pressures (groupthink), poses a costly challenge for teams.