Spanish Equity Funds Research Articles

Disposition effect in fund managers. Fund and stock-specific factors and the upshot for investors

This paper evaluates the presence of disposition effect in Spanish equity funds and its implications for investors. We find that disposition spread is not a widespread bias, but it exists across funds. This effect is especially intense during the crisis period, but it is mitigated in large management companies or in those that belong to bank holding groups. For a new insight when disentangling managers’ decisions, this study shows that the disposition effect is not only a cognitive bias inherent to the person, but it mostly depends on the type of transactions. Partial sales, domestic stocks, stocks with low portfolio weights, and stocks with lower past returns are disposition-prone. The existence of disposition effect is confirmed; however, investors are not harmed in terms of fund performance.

Evidence from purchases and redemptions in the Spanish equity fund market

The potential relationship between fund flows and performance is a remarkable topic in the mutual fund industry that has been explored by many empirical academic papers. In this work, it is shown that investors in Spanish equity funds respond to past good performance by increasing their (net) purchases, and to past poor performance by reducing their (net) purchases. However, the relationship between flows and performance appears to be non-linear. This non-linearity is different from the one observed in most of the previous research papers. These papers did not find any response to poor performance. Net purchases, purchases and redemptions are analysed separately and, as a new feature, the retail and wholesale markets of mutual funds are addressed. The comparison of the two markets reveals some interesting differences on the determinants of the financial decisions regarding purchasing or selling shares of equity funds. It was also found that investor sensitivity to poor performance is reduced in the case of more visible funds. This puzzling result, which originates in the retail segment, could be explained in terms of the market power of fund families.

Evidence from Purchases and Redemptions in the Spanish Equity Fund Market

The potential relationship between fund flows and performance is a remarkable topic in the mutual fund industry that has been explored by many empirical academic papers. In this work, it is shown that investors in Spanish equity funds respond to past good performance by increasing their (net) purchases, and to past poor performance by reducing their (net) purchases. However, the relationship be-tween flows and performance appears to be non-linear. This non-linearity is different from the one observed in most of the previous research papers. These papers did not find any response to poor performance. Net purchases, purchases and redemptions are analysed separately and, as a new feature, the retail and wholesale markets of mutual funds are addressed. The comparison of the two markets reveals some interesting differences on the determinants of the financial decisions regarding purchasing or selling shares of equity funds. It was also found that investor sensitivity to poor performance is reduced in the case of more visible funds. This puzzling result, which originates in the retail segment, could be explained in terms of the market power of fund families.

What Determines Investors’ Purchases and Redemptions?

This study examines the investment flows of Spanish domestic equity funds. Increasing research is specialized in analyzing the determinants of fund flows, but few studies have been able to investigate buying and selling behavior separately. Unique data from Spain allow us to tackle this issue by using exact information of purchases and redemptions. We find that investment flows are sensitive to past performance, though this sensitivity is more noticeable when using inflows and outflows in contrast to implied flows. Furthermore, our empirical results suggest asymmetric behavior of investors given that purchases are better explained by fund return than redemptions. In general, investors are risk averse and fee-sensitive and do not value greater size of Spanish equity funds.

Behavioural Patterns in German and Spanish Equity Funds: A Comparative Study*

Behavioural Patterns in German and Spanish Equity Funds: A Comparative Study*

Herding behaviour in Spanish equity funds

We analyse the herding phenomenon in the management style of Spanish equity funds. Using the methodology of Lakonishok et al. (1992) and Sharpe's style analysis (1992), we find interesting conclusions in the investment behaviour of fund managers, a barely-explored aspect, especially in the Spanish market.

Behavioural Patterns in German and Spanish Equity Funds: A Comparative Study

Behavioural Patterns in German and Spanish Equity Funds: A Comparative Study

Performance metrics for Spanish investment funds

The aim of this study is to examine the most appropriate way to capture the true performance of Spanish equity funds, considering that almost all have significantly asymmetric return distributions over the time period studied. We apply alternative risk measures, such as semi-standard deviation and absolute deviation and test if the associated performance measures provide markedly different rankings from the classic indices. We find that one subset of funds analysed displays negative return premia, and make an additional adjustment to the suggested performance metrics. Overall when comparing the rankings, we see strong evidence that — despite the strong asymmetry in returns — the non-traditional performance metrics do not differ markedly from the traditional measurements. This would point to the Spanish equity market behaving more like more mature and liquid markets, and hence being amenable to the application of classic performance and investment management tools.

The influence of performance on the flows into Spanish equity funds

This is a study about how performance influences on the behaviour of investors in Spanish domestic equity funds over an eight-year period. This is a broad timeframe given the relative immaturity of this market when compared to other more developed markets such as the American or English, among others. It is, in this respect, a pioneering and innovative study of the Spanish market. Well-defined behavioural guidelines are found, with results indicating that investors tend to consider the results obtained by funds in a fairly immediate past though they take a relatively broad time before making their decisions.

Performance persistence in Spanish equity funds

Past literature shows that tests of performance persistence do not agree in the most important mutual fund markets and so there is a need for further research in other smaller countries such as Spain, one of the biggest growth fund markets in Europe in the nineties. Spanish equity funds investing in domestic stocks exhibit mixed results when performance persistence is analysed. These results were obtained from an exhaustive application of parametric and non-parametric procedures proposed in the past financial literature.

Style portfolio performance: Empirical evidence from the Spanish equity funds

This work evaluates the performance of the results obtained from a sample of Spanish equity funds in relation to what could have been obtained if the style portfolios allocated by each one had been passively tracked. This analysis is undertaken based on three methods never before applied in Spain, all reaching the conclusion that, in general terms, the active management of Spanish equity funds subtracts added value from the performance of their style portfolios. Lastly, the application of a novel performance measure in addition to the Performance Style (PS) proposed by Sharpe (1992, ‘Asset Allocation: Management Style and Performance Measurement’, Journal of Portfolio Management, Winter, 18, 7–19) shows that Spanish equity funds allocate style portfolios efficiently within the mean-variance framework.