Finance Brown Bag Seminar
The Finance Brown Bag Seminar is held jointly with the Vienna Graduate School of Finance (VGSF) and serves as a presentation platform for PhD students, faculty members, and visitors. It usually takes place on Wednesdays from 12:00 to 13:00 (location tba). For further information, please contact email@example.com
Winter term 2017/2018
October 20th, 2017 11:00-12:00, D3.0.225
Maria Chaderina (WU)
"Why do mutual funds hold cash?”, co-authored with Christoph Scheuch
Abstract: We argue that mutual funds hold liquid assets at least partially to collect rents, a motive different from liquidity transformation. We propose a parsimonious model that incorporates the effects of trading costs and liquidity management on fund flows. Following bad performance, managers compensated on fund size optimally reduce illiquid investment to maximize future expected returns, preserving some liq- uid assets. Managers compensated on past performance, on the other hand, meet redemptions by depleting liquid assets first. However, because of lower expected returns this only intensifies the outflow and destabilizes the fund. Moreover, the use of cash for rent collection is preferred to higher management fees, as it makes mutual funds less prone to liquidity-driven withdrawals. Overall, we caution not to interpret the observed balances of liquid assets in mutual funds as conclusive evidence of the magnitude for liquidity transformation these funds provide.
September 18th, 2017 16:00-17:15, D4.0.039
Lasse H. Pedersen (Copenhagen Business School)
"Efficiently Inefficient Markets for Assets and Asset Management"
Abstract: We consider a model where investors can invest directly or search for an asset manager, information about assets is costly, and managers charge an endogenous fee. The efficiency of asset prices is linked to the efficiency of the asset management market: if investors can find managers more easily, more money is allocated to active management, fees are lower, and asset prices are more efficient. Informed managers outperform after fees, uninformed managers underperform after fees, and the net performance of the average manager depends on the number of "noise allocators." Small investors should be passive, but large and sophisticated investors benefit from searching for informed active managers since their search cost is low relative to capital. Hence, managers with larger and more sophisticated investors are expected to outperform.