Thesis (Ph.D)--Management, Georgia Institute of Technology, 2009. / Committee Chair: Eun, Cheol; Committee Member: Jayaraman, Narayanan; Committee Member: Kilic, Rehim; Committee Member: Lee, Suzanne; Committee Member: Wang, Qinghai. Part of the SMARTech Electronic Thesis and Dissertation Collection.

Thesis (M.P.A.)--University of Hong Kong, 2000. / Includes bibliographical references (leaves 141-150). Also available in print.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2003. / Includes bibliographical references.

Thesis (Ph. D.)--University of California, San Diego, 2006. / Title from first page of PDF file (viewed October 10, 2006). Available via ProQuest Digital Dissertations. Vita. Includes bibliographical references (p. 174-178).

Active versus passive investing is a popular topic within the investment community and beyond. In particular, many are concerned with fund flows in and out of active and passive investments. Existing research suggests that recent returns are a reason for the capital flow from active to passive and that fees also impact flows negatively. With U.S. equity mutual funds as a proxy for active investing and U.S. equity ETFs as a proxy for passive investing, I show that prior month flows have a positive and significant relationship with current flows for both ETFs and mutual funds, as well as for flows from ETFs to mutual funds. I also show that mutual fund monthly returns have a positive relationship with flows of mutual funds and flows from ETFs to mutual funds, while ETF monthly returns have a negative relationship with flows from ETFs to mutual funds. This supports prior literature. I also find that the differential in mutual fund and ETF returns (rMF – rETF) is insignificant and negative for net fund flows into ETFs. I find a generally positive relationship between mutual fund expense ratios and flows into mutual funds, as well as with flows from ETFs to mutual funds. Finally, I find a negative relationship between ETF expense ratios and flows into ETFs, as well as with flows from ETFs to mutual funds. The relationships between expense ratios and flows mostly contradict prevailing literature, except for the relationship between ETF expense ratios and ETF flows. This suggests passive investors are potentially more price-conscious than active investors, as passive investors experience negative flows as expense ratios increase, while flows into mutual funds do not have that relationship with expense ratios. Higher fees for mutual funds may also suggest a change in the composition of mutual funds, as funds similar to ETFs exit and new mutual funds become even more active.

The study critically reviews the application of the Sharia investment screening process, from both Sharia and practical perspectives. In practice, there appears to be inconsistencies in the Sharia investment screening criteria among Islamic investment institutions, especially in terms of the tolerance level, as well as the changing of the Sharia rules. This certainly affects the confidence in the Sharia screening criteria standards, which might adversely affect the Islamic mutual funds industry. The non-income generating aspects, such as social and environmental concerns, are not incorporated in the contemporary Islamic investment screening process. This seems to be rather paradoxical, since it contradicts the Sharia-embedded ethical values of fairness, justice and equity. The thesis contends that external audits regarding the implementation of Sharia rules should be adopted to ensure the compliance of the investment with Sharia guidelines. Furthermore, it is desirable for Sharia boards to adopt corporate governance practice and take proactive roles, especially in Muslim countries, in order to influence companies to adopt Sharia-compliant investment practices. The tolerance levels of conventional finance activities of companies in Muslim countries should be re-evaluated and lowered in the Islamic investment screening criteria. This is partly due to the popularity and wide availability of Islamic banking and alternative Sharia instruments to interest-based finance, coupled with the fact that Muslim shareholders form the majority and hence, can vote to influence companies to adopt Sharia-compliant financing modes. In addition, the study provides empirical evidence that the Sharia screening process does not seem to have an adverse impact on either the absolute or the risk-adjusted performance of Islamic equity mutual funds in Saudi Arabia, compared to their conventional counterpart equity mutual funds and also compared to their market benchmarks. This is regardless of the geographical investment focus subgroup examined and the market benchmark used (whether Islamic or conventional). Furthermore, the systematic risk analysis shows that in most cases Islamic equity mutual funds in Saudi Arabia tend to be significantly less exposed to market risk compared to their conventional counterpart equity mutual funds, and compared to their conventional market benchmarks. Thus, the assumption that Sharia investment constraints lead to inferior performance and riskier investment portfolios because of the relatively limited investment universe seems to be rejected. This implies that Muslim investors in Saudi Arabia can choose Islamic investments that are consistent with their beliefs without being forced to either sacrifice performance or expose themselves to higher risk. The investment style analysis also shows that the Sharia screening process does not seem to influence Islamic equity mutual funds in Saudi Arabia towards small or growth companies compared to their conventional counterparts of similar geographical investment focus. Moreover, the study provides empirical evidence that the performance difference between Islamic and conventional socially responsible indices is insignificant despite applying different sets of screening criteria. However, Islamic indices tend to be associated with relatively lower systematic risk compared to their conventional socially responsible counterparts. Therefore, Islamic investment portfolios can be marketed to socially responsible investors who share similar beliefs in terms of excluding certain industries such as tobacco, alcohol, pornography, defense, etc., in spite of no financial filters being used by conventional socially responsible investors. This finding is especially appealing in Muslim countries where there are usually no mutual funds categorized as socially responsible, but rather Islamic. Moreover, the study also provides empirical evidence that incorporating conventional sustainability criteria into the traditional Sharia screening process does not lead to inferior performance or higher exposure to systematic risk. The results indicate that regardless of the restriction used - whether Islamic, socially responsible or Islamic socially responsible - restricted investment portfolios do not seem to be associated with inferior performance or higher exposure to risk. This finding opens the door for Sharia scholars and Muslim investors to reconsider broader social and environmental aspects as part of the Sharia investment screening process. With regards to investment style, Islamic and Islamic socially responsible indices seem to be skewed towards growth cap as compared to their conventional and conventional socially responsible indices, while Islamic socially responsible also leans towards a large cap. This implies that despite the performance similarity between, Islamic, conventional and conventional socially responsible indices, the returns driver of each type of investment tends to be different.

We consider a model of active asset management in which mutual fund managers exert unobservable effort to earn excess returns. Investors allocate capital to actively managed funds and passively managed products. In equilibrium, investors are indifferent between investing an additional dollar with an active manager or with a passively managed product. As passively managed products become more attractive to investors, active managers’ revenues from portfolio-management services fall, reducing their effort incentives. More-severe decreasing-returns-to-scale are also associated with reduced incentives and increased moral hazard. Performance-based fees and holdings-based data are all unlikely to mitigate moral hazard.

I investigate whether the business relations between mutual funds and brokerage firms influence sell-side analyst coverage and recommendations. Using a comprehensive sample of analyst recommendations in China over the 2004-2008 period, I find that the likelihood of analyst coverage and analysts’ relative recommendations, benchmarked against consensus recommendations, are positively associated with the mutual fund business relationship. I measure the business relation by the weight of a stock in the mutual fund client’s portfolio and the commission revenue generated from the mutual fund clients. My results show that mutual funds take advantage of these optimistic recommendations by selling the stocks. I also find evidence that analysts employed in politically connected brokerage firms inflate their recommendations on state-controlled listed enterprises. Lastly, I examine the short-term and long-term investment returns from a strategy that follows the analyst recommendations. In the short-term, I find positive stock returns, which benefit the client mutual funds. However, I also find evidence that investors recognize the conflict of interest and caps the stock price increases. In the longer-term, the strong buy and buy recommendations yield zero or negative stock returns.

A research report submitted to the Faculty of Commerce, Law and Management, in partial fulfilment of the requirement for the degree of Master of Commerce, University of the Witwatersrand. / As the objective of investing is the maximization of wealth, it is imperative for investors to find instruments which will help them achieve their goal. A real estate investment trust can be a form of wealth maximization if an investor is knowledgeable about its long-term performance and the drivers of this performance. This study employed the use of panel regression models to isolate the performance of South African REITs, in order to compare the risk-adjusted returns of REIT segments over the long term and to identify the determinants of REIT risk-adjusted returns. Risk-adjusted performance ratios were used to measure return on real estate investment funds to conclude on the performance of SA REITs. The Sharpe ratio, Treynor index and Jensen’s Alpha were performance measures of 55 JSE-listed and delisted REITs over 18 years (2000 – 2017) thus incorporating 433 firm-years.The empirical evidence suggests that size, book-to-market, property asset intensity, dividend yield and real GDP growth influence the performance of South African real estate investment trusts and Hotel and Resort REITs as well as Retail REIT significantly underperformed the other REIT sectors, under the Sharpe ratio and Jensen’s Alpha. Furthermore, the REIT performance during the financial crisis outperformed their performance during the other market phases. / PH2020

As personal backgrounds and experiences vary, emotions stemming from exposure to violence shape a manager's risk perception and investment strategies. We document significant variation in the risk exposure of managers who were raised in states with higher per capita violence rates than those who were not. Although managers exposed to violence tend to hold more stocks in their portfolios, take less idiosyncratic risk, hold portfolios with betas closer to 1, and have less concentrated portfolios, these managers' risk-adjusted performance is not statistically different than that of their counterparts who were not exposed to violence.