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Studies

Get to know our research programmes and find out about the results of the individual studies:

Mutual Funds and fund managers

  • Inhalt ausklappen Inhalt einklappen Is mutual fund product information comprehensible for the average investor?Is mutual fund product information comprehensible for the average investor?

    With the introduction of short-form key investor information documents (KIIDs) for mutual funds in 2012, the European financial regulation underlines the importance of using simple and easy to understand language in financial product information disclosure. The objective is to provide private investors with easier and more transparent access to product information. We evaluate whether these documents and the accompanying "plain language guidelines" affect the readability of product information for mutual funds. Applying textual analytics on a large-scale sample of all mutual funds registered for sale in Germany, we are the first to quantitatively benchmark the readability of product information for retail investors on a large scale. While fund information qualifies as very difficult to read requiring up to 15 years of education, we find that readability improved following recent disclosure regulations. Improvements are driven by simpler syntax and writing style. Still, we identify an increase in use of jargon and non-compliance with mandatory design requirements. We discuss our results and propose potential disclosure improvements.

    This project is funded by the Fritz Thyssen Stiftung.

    The study Double Dutch Finally Fixed? A Large-Scale Investigation into the Readability of Mandatory Financial Product Information (Scheld, Stolper & Walter, 2021) documents the project and is published in the Journal of Consumer Policy 44 (2).

  • Inhalt ausklappen Inhalt einklappen How do local disclosure interventions on funds’ "activeness" affect investors and fund providers?How do local disclosure interventions on funds’ "activeness" affect investors and fund providers?

    As of April 2018, several of the largest U.S. mutual fund firms have been constrained to disclose a measure of fund manager activeness to retail investors. We evaluate the effectiveness of this intervention. We find that, even for those funds with a large overlap of holdings with the benchmark, no measurable effort to increase management activeness can be observed subsequent to the imposed disclosure. By contrast, investors strongly respond to the intervention. However, an analysis of investor reaction suggests that they do not rationally trade on the newly available information. We discuss our results and propose potential disclosure improvements.

    This project is funded by the Fritz Thyssen Stiftung. 

    The discussion paper Leveling the Playing field? the Effect of Disclosing Fund Manager Activeness to Individual Investors (Scheld, Stolper & Walter, 2022) documents the project.

  • Inhalt ausklappen Inhalt einklappen How does strategic "signaling" of mutual fund managers affect private investors’ asset allocation?How does strategic "signaling" of mutual fund managers affect private investors’ asset allocation?

    "Skin-in-the-Game" (SitG), indicating a fund manager’s private investment in her own funds, allows to align interests of fund managers and investors. Since 2005, US fund managers have been obliged to disclose their shares in self-managed funds. However, the information can be considered inaccessible to private investors, as it is neither standardized nor transparently disclosed to them. We use a different, yet more salient channel through which SitG is often signaled: the funds’ letter to the shareholders (LS). Although LS usually do not allow to infer the exact investment of the manager to, they do provide a verbal indication of whether personal shares are held by the fund management. Using textual analysis on a large sample (~16,000 observations) of mutual funds’, we are the first to show that investors trade on the verbal commitment of fund managers in the LS. We find significant inflows of funds by private investors in direct connection with the publication of LS that communicate SitG verbally. In contrast, investors do not react on the actual amount invested by portfolio as required to be disclosed by the SEC. Our findings highlight the increasing need for regulators to focus on not only content, but also the format of disclosure requirements.

    This project is funded by the Fritz Thyssen Stiftung.

  • Inhalt ausklappen Inhalt einklappen Investment funds: actively managed and yet only passively invested?Investment funds: actively managed and yet only passively invested?

    In the project "Affiliated mutual funds: beyond the reach of the invisible hand?" Prof. Dr. Oscar Stolper, Prof. Dr. Andreas Walter and Kim Heyden are investigating how the distribution channels of investment funds affect the activity of fund managers. In many countries banks are the main distribution channel for funds and they primarily sell the funds of their own investment company ("affiliated funds"). "Affiliated funds" are exposed to less competitive pressure due to this exclusive distribution channel, as a result of which the activity of fund management in these funds is significantly lower. They also charge the same fees for funds with high and low management costs. In contrast, funds without an exclusive distribution channel charge lower fees for funds with less activity.

  • Inhalt ausklappen Inhalt einklappen How does narcissism affect fund management?How does narcissism affect fund management?

    Analyzing verbatim transcribed interviews with mutual fund managers, we show that their level of narcissism is highly relevant for the delegated investment task they are entrusted with. We find that narcissistic fund managers are 41% more likely to deviate from the advertised investment style. Moreover, while funds run by narcissistic managers on average feature significantly higher investment risk, this does not reflect in higher returns. Regardless of the fund’s performance, however, we fail to observe any measurable investor reaction to fund manager narcissism, i.e. suggesting that investors are unaware of investment-relevant consequences of this personality trait. 

    The discussion paper Fund manager narcissism (Scheld, Stolper & Bauer, 2022) documents the project and has been presented at SGF 2022 and featured in MarketWatch, MorningstarCapital+ and CapInside.

  • Inhalt ausklappen Inhalt einklappen Which traits shape fund managers?Which traits shape fund managers?

    In the project "The Big5 in fund management" Anna-Lena Bauer investigates, in collaboration with Prof. Dr. Stolper and Dominik Scheld, the influence of the "Big 5" personality dimension on fund managers. In addition to a comprehensive typification of fund management, the project aims to quantify the influence of personality dimensions in the context of professional investments. The expected results of the project will allow insights on the "interiority" of fund managers and the potential connection between professional money management and psychological characteristics.

Financial knowledge, financial consulting and household financial decisions