I examine the motivations of mutual fund families when deciding what mutual funds to launch, when to launch them, and how they are going to be launched. I begin by analyzing the influence of investor preferences on the flow to open-end mutual funds by associating flow to a fund with the degree to which the fund has an in-favor or trendy name. Results show that funds which conform to market-wide trends generate significantly higher inflows compared to less trendy funds. In my third chapter I examine the decision to launch a fund and show that investment companies have motivation, in the absence of any investment ability, to launch a trendy fund. Launching a trendy fund is beneficial to the fund family, generating additional revenue through fee collection, but is potentially harmful to investors with trendy fund startups underperforming non-trendy fund startups by over 1% per year. My fourth chapter examines the process of mutual fund incubation and shows that funds generate greater inflows post-incubation as a result of investors' positive response to incubation period performance. However, incubation appears to be used for reasons beyond generating a track record of performance. Specifically, fund families are more likely to release underperforming incubated funds if they are struggling to attract inflows to a large objective class.

I investigate mutual fund flows at the individual fund and at the fund family level. At the individual, I use SEC filings to decompose fund flows into inflows and outflows. This decomposition of net flows into its component parts provides a way to examine differences in how search costs and investor learning affect investors who are entering a fund (or adding to their investments) versus those investors who are leaving a fund (or decreasing their investments). I then examine the effect of the existence of an advertisement for the fund on these investors. At the mutual fund family level, I examine how the characteristics and performance of mutual fund families affect the flows to the family as a whole. I then examine the effects of advertising expenditures on flows to the fund family. / text

Thesis advisor: Ronnie Sadka / In the first essay of this dissertation, I study the impact that hedge fund manager connections have on investment ideas. I find that hedge fund managers who previously worked at the same prior hedge fund invest more similarly, hold more overlapping portfolios, and trade and overweight the same stocks relative to managers who do not share an employment connection. Overall, these results support theoretical prediction that networked managers share ideas that leads to price discovery for commonly held stocks. The second essay analyzes the role of ETFs in mutual fund families and is joint work with Caitlin Dannhauser. We study mutual fund and ETF twins - index funds from the same family that follow the same benchmark. We find that mutual fund twins have lower overall tax burdens while ETF twins have higher long-term yields and unrealized capital gains, but are compensated with lower expense ratios. Fund families benefit because twin offerings generate higher flows than their non-twin peers. These results support previous research that mutual fund families use diversification and subsidization to benefit the overall family. In the third essay, I study the use of latent factors in explaining hedge fund returns. Using an alternative latent factor estimator, asymptotic principal components (APC), I find explains more of the common variation of hedge fund returns on average and does so with greater efficiency than that found in the literature. I also identify an increase in the common variation across hedge fund excess return in the time-series via the extracted latent factors. My results suggest an impetus for future researchers to employ APC factors when characterizing hedge fund performance. / Thesis (PhD) — Boston College, 2017. / Submitted to: Boston College. Carroll School of Management. / Discipline: Finance.

Thesis advisor: Jeffrey Pontiff / The first essay of this dissertation studies the effect of Exchange Traded Funds (ETFs) on the yields and liquidity of the underlying corporate bonds. I find that ETFs lower the yield, have an insignificant or negative impact on the liquidity, and decrease the retail volume of constituent bonds. Overall, these results support theoretical predications that basket securities entice liquidity traders to exit the underlying market. The second essay analyzes the role of ETFs in mutual fund families and is joint work with Harold Spilker. We study mutual fund and ETF twins - index funds from the same family that follow the same benchmark. Mutual fund twins are shown to have lower tax burdens, long-term capital gains yields, and unrealized capital gains. Conversely, ETF twins have higher long-term yields and unrealized capital gains, but are compensated with lower expense ratios. Fund families benefit because twin offerings generate higher flows than their non-twin peers. These results support previous research that mutual fund families use diversification and subsidization to benefit the overall family. The third essay provides academics with a detailed understanding of the history, structure, regulation, and prospects of ETFs. The essay documents that the growth of index investing can largely be attributed to ETFs. The information and nuances discussed provide a baseline for developing future research questions and data. / Thesis (PhD) — Boston College, 2015. / Submitted to: Boston College. Carroll School of Management. / Discipline: Finance.

abstract: Since the 2008 financial crisis, the total assets managed by U.S. mutual funds have frequently hit new highs and the industry has become increasingly concentrated. In the meantime, two strategies have emerged in the American mutual fund industry: active and passive management. What factors affect the market shares of firms that adopted these two different strategies? Building on strategic management theories, I suggest that mutual fund families that adopted active and passive management strategies tend to compete in different dimensions. Active management fund families tend to implement the product differentiation strategy, competing on “product quality” through excess-returns, innovative and differentiated fund products; passively managed fund families focus more on "price competition" by conducting an overall cost leadership strategy. This research examines the driven factors of fund families’ market share. The results show that: the market share of actively managed fund families is more sensitive to positive impact of fund performance, while passive management firms are more sensitive to negative effect of management fees and total loads; 12b-1 expense improves the competitiveness of active fund families and thus enhance their market shares but it has negative impact on passive fund families. In addition, high turnover decreases the market share of all fund families, especially for passively managed families. The outcome reveals the latest US mutual industry orientation: products differentiation, turnover, management fee have greater impact on market share while the competition of fund performance is diminishing. The Matthew effect in US mutual fund industry is outstanding. Industrial competition dimension expands from performance and products to cost cutting. Empirical analysis on Chinese mutual fund families is also conducted. Different from the US, there is only small number of mutual fund families targeting passive management products. The results show that the distribution channel has the largest impact on Chinese mutual fund family market share and investors are more willing to chase performance than to consider cost-efficient fund families. This study then analyses reasons behind the difference of Chinese and American mutual fund industries. / Dissertation/Thesis / Doctoral Dissertation Business Administration 2018