Joseph Chen

Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization

We investigate the effect of scale on performance in the active money management industry. We first document that fund returns, both before and after fees and expenses, decline with lagged fund size, even after accounting for various performance benchmarks. We then explore a number of potential explanations for this relationship. This association is most pronounced among funds that have to invest in small and illiquid stocks, suggesting that these adverse scale effects are related to liquidity. Controlling for its size, a funds return does not deteriorate with the size of the family that it belongs to, indicating that scale need not be bad for performance depending on how the fund is organized. Finally, using data on whether funds are solo-managed or team-managed and the composition of fund investments, we explore the idea that scale erodes fund performance because of the interaction of liquidity and organizational diseconomies.

Forecasting crashes: trading volume, past returns, and conditional skewness in stock prices

This paper is an investigation into the determinants of asymmetries in stock returns. We develop a series of cross-sectional regression specifications which attempt to forecast skewness in the daily returns of individual stocks. Negative skewness is most pronounced in stocks that have experienced: 1) an increase in trading volume relative to trend over the prior six months; and 2) positive returns over the prior thirty-six months. The first finding is consistent with the model of Hong and Stein (1999), which predicts that negative asymmetries are more likely to occur when there are large differences of opinion among investors. The latter finding fits with a number of theories, most notably Blanchard and Watsons (1982) rendition of stock-price bubbles. Analogous results also obtain when we attempt to forecast the skewness of the aggregate stock market, though our statistical power in this case is limited.

Strategic Mutual Fund Tournaments

This paper characterizes the optimal strategies of mutual fund managers competing in a multi-period winner-take-all tournament. Taking account of both multiple periods and competition between more than two managers, the optimal strategies are contingent on the state at the interim date. In the final period all managers maximize the amount of risk that they add to their portfolios with the exception of the leading fund. This fund locks in its advantage by reducing risk only if it has a sufficiently large lead. Empirically, we find that consistent with the theory, funds with larger leads decrease risk; however trailing funds do not increase risks. These results are robust to using different ways of controlling for systematic risk exposures.

The Electrical Characterization of Molecular-Beam-Deposited LaAlO 3 on GaAs and its Annealing Effects

ABSTRACT The electrical properties of Al/LaAlO 3 /GaAs metal-oxide-semiconductor capacitors were investigated. A thick arsenic (As 2 ) capping layer was used to protect the GaAs surface from oxidation and contamination during the air exposure that occurred between the deposition of the GaAs and LaAlO 3 layers in different molecular-beam epitaxy systems. Amorphous LaAlO 3 was deposited on c(4×4) - and (2×4) - reconstructed (100) GaAs surfaces. Post dielectric deposition annealing was found to improve the capacitance-voltage ( C - V ) characteristics by eliminating frequency dispersion in the depletion and weak inversion regimes and diminished the bi-directional C-V hysteresis to 210 mV. Reasonably low gate leakage current was maintained after annealing. INTRODUCTION One of the approaches to realize low power and high-speed/frequency devices is using materials in which the carrier mobility is much higher than that of silicon, such as gallium arsenide (GaAs). For the past three decades, however, the lack of useful surface passivation for compound semiconductors has precluded development of metal-oxide-semiconductor (MOS) devices and caused high surface recombination parasitic in scaled devices. The oxidation and the metal deposition on III-V materials create a high interfacial trap density (