
Implication of Regret on Mutual Funds Managers Risk-Shifting Decision
Benyelles, Bouchra; Arisoy, Eser (2018), Implication of Regret on Mutual Funds Managers Risk-Shifting Decision, 11th Annual Meeting of the Academy of Behavioral Finance & Economics, 2018-10, Chicago, United States
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Type
Communication / ConférenceDate
2018Conference title
11th Annual Meeting of the Academy of Behavioral Finance & EconomicsConference date
2018-10Conference city
ChicagoConference country
United StatesMetadata
Show full item recordAuthor(s)
Benyelles, BouchraDauphine Recherches en Management [DRM]
Arisoy, Eser
Dauphine Recherches en Management [DRM]
Abstract (EN)
We investigate whether regret can explain mutual fund managers’ risk-shifting behav-ior. We propose a theoretical framework by introducing a modified utility functionfor mutual fund managers who are both risk averse and regret averse. The empiricaltests of the proposed framework imply that mutual fund managers who perform worsethan their peers (i.e., who exhibit return-regret) tend to have a positive risk-shifting,whereas those who have a higher portfolio volatility (i.e., who exhibit variance-regret)tend to have a negative risk-shifting behavior over the next period. Furthermore, wedocument that the effect of variance regret is more significant for institutional fundsthan for retail funds. Finally, when considering fund flows, the return-regret effect ismore significant than the variance-regret effect, confirming that investors’ outflows aremainly due fund managers’ bad performance relative to their peers. The results arerobust to using alternative measures of regret based on funds’ potential benchmarks.Subjects / Keywords
Regret theory; Mutual Funds; Risk shiftingRelated items
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