José Luis Sarto

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 Sharpes style analysis (1992), we find interesting conclusions in the investment behaviour of fund managers, a barely-explored aspect, especially in the Spanish market.

Herding behaviour in strategic asset allocations: new approaches on quantitative and intertemporal imitation

In this article, we contribute to financial literature on institutional herding behaviour, intertemporal imitation and informational cascades by analysing the changes in the strategic asset allocations of Spanish equity pension plans investing in Eurozone equities. This article is mainly focused on methodological improvements. Firstly, the study examines the herding phenomenon by using the traditional measure developed by Lakonishok, Shleifer and Vishny (LSV) (1992). Afterwards, some original analyses such as the consideration of a restricted definition of buying and selling and the amount of the variations in the strategic allocations are carried out to overcome certain shortcomings existing in this metric. Moreover, we analyse the intertemporal imitation and the informational cascades through time-series regressions. The results show that Spanish pension managers are involved in herd behaviour, a phenomenon that is reinforced when important movements of the strategic allocations are required. Intertemporal analyses confirm the convergent behaviour of a significant number of pension plans; while the study of informational cascades allows us to discriminate between those plans that present anticipatory abilities and those that follow the strategic movements of the rest of the managers.

Evaluation of performance and conditional information: the case of Spanish mutual funds

The performance of Spanish domestic equities improves considerably when diverse public information variables are taken into consideration. We have taken up to eight independent variables into consideration to evaluate the performance of a largely unexplored market over a broad horizon.

Financial consequences of mutual fund mergers

This study examines the impact of mutual fund mergers on performance and investment flows of target and acquiring funds. Results indicate some improvements in the post-merger performance for target funds shareholders. Results also confirm prior evidence of negative net asset flows in target funds in the pre-merger period as well as negative, but not significant, net asset flows in the years following the merger. However, a more detailed analysis allows us to observe that this lack of significance in the negative reaction of investors to mutual fund mergers is explained by the compensation of abnormally high inflows and outflows in the resultant funds. These substantial flows are significantly above the average in their market segment, especially regarding money flows. This finding provides evidence that investors pay attention to mutual fund mergers, especially institutional investors who are concentrated on the market possibilities resulting from these organizational processes.

Evaluating the style portfolio performance of Spanish equity pension plans

ABSTRACT This paper firstly examines the strategic asset allocations followed by Spanish equity pension plans from 2001 to 2006. Once the investment style of each portfolio is known, the second aim of the paper is to analyse the performance obtained by these portfolios along with the performance obtained by their investment style to determine the value added by each manager and the suitability of the style chosen. In this sense, the performance evaluation has been conducted by considering different performance measures used in financial Literature along with an alternative metric proposed to test the consistency of the different metrics. Finally, the study also addresses some robustness analyses to examine the consequences of imposing the portfolio constraint when non-exhaustive models are used and the effects of some well-known biases such as survivorship and look-ahead bias.

Decisions of domestic equity fund investors: determinants and search costs

In the present study, we confirm the asymmetry of the performance-flow relationship documented in the literature, but with the particularities of the sample of Spanish funds. Thus, we conclude that mid-performers show no significant influence on investor decisions. The panel data analysis also allows us to conclude that custodial and management fees and the size of the fund have a negative impact on the flows into funds. Empirical evidence is provided on the differential response of investors to the decision factors depending on the market states.

Análisis de la persistencia en rentabilidad de los FIAMM y de los determinantes de sus comisiones

RESUMEN Este trabajo analiza la persistencia de la rentabilidad, antes y después de comisiones, de los fondos de inversión españoles del mercado monetario (FIAMM), alternativa de inversión poco analizada en los mercados financieros internacionales. Dicho análisis se realiza para diferentes horizontes temporales, tanto en el corto plazo como en el largo plazo, utilizando para ello la metodología de las tablas de contingencia. Además de tablas 2×2, hemos ampliado nuestro estudio a tablas 4×4, lo que permite un análisis empírico más completo. Una exhaustiva aplicación de tests estadísticos nos permite concluir una significativa persistencia en rentabilidad neta en los análisis de corto plazo y resultados más dispares para horizontes temporales más largos. Dicho fenómeno también es observado en rentabilidades brutas aunque, generalmente, en menor medida, circunstancia que nos permite afirmar que las comisiones cobradas por los gestores de estos fondos están amplificando la persistencia de sus resultados. Este resultado justifica el análisis de las variables que influyen en las comisiones cobradas por tales fondos mediante la utilización de regresiones Tobit. Los resultados obtenidos muestran que la inversión media de los partícipes en el fondo, la edad y la rentabilidad bruta son algunas de las variables que afectan a la comisión cobrada por los FIAMM.

Efficiency of the strategic style of pension funds: an application of the variants of the slacks-based measure in DEA

A 2010 paper by Kaoru Tone proposes four variants of the slacks-based measure of efficiency (SBM) to overcome the limitations of this well-known Data Envelopment Analysis (DEA) approach when the reference points of the efficient frontier may not be adequate. In this study, we apply these variants for the first time to a real-world problem to evaluate the efficiency of one of the most relevant decisions in pension fund management: The strategic asset allocation. The results highlight the relevance of SBM Variation III, which considers clusters of portfolios with similar characteristics, to appropriately identify the reference set of each portfolio. Therefore, this variant allows for the identification of locally efficient but globally inefficient portfolios. Our results also reject the notion of a positive relation between management resources and efficiency of the strategic investment style.

Herding behaviour in Spanish global funds' country allocations *

ABSTRACT The monthly portfolio holdings of 363 Spanish global funds were analysed to test for herding behaviour on the part of fund managers. Unlike in previous studies, our approach to herding behaviour is not on a stock level but rather on a country allocation level. The country allocation is especially interesting in global funds, which have no portfolio constraints. Significant herding is found in the sample, and the level of herding is higher in countries with smaller portfolio shares. In the sample analysed, there is no clear evidence of informational cascades according to the country in which managers invest. Large fund families show significant leading behaviour in a higher number of countries than small 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.