Essays on the Investment Decisions of Individual and Institutional Investors Público
Jame, Russell Elman (2010)
Abstract
Essays on the Investment Decisions of Individual and
Institutional Investors
By Russell Jame
This dissertation investigates the investment decisions of
individual and institutional investors. In
the first essay, ("Organizational Structure and Fund Performance:
Pension Funds vs. Mutual
Funds"), I examine how differences in organizational structure
influence the investment choices
and performance of pension funds and mutual funds. I present
evidence which suggests that the
additional layers of delegation found in the pension fund industry
generate agency costs that
hinder pension fund performance. In the second essay,
("Understanding the S&P 500
Composition Effect: Evidence from Transaction Data", joint work
with Clifton Green) we shed
new light on the S&P 500 composition effect by examining the
investment decisions of index
funds and individual investors around S&P 500 composition
changes. Our central finding is that
that many index funds are willing to accept tracking error in
exchange for better execution prices.
In the third essay, ("Retail Investor Industry Herding", joint work
with Qing Tong), we examine
the industry wide investment decisions of individuals (retail
investors). We find that retail
investors herd into industries, and that industry herding can
forecasts industry returns. The
industries most heavily bought by retail investors significantly
underperform the industries most
heavily sold by retail investors over the subsequent 3 to 12
months. Taken together, our results
suggest that retail investors categorize stocks by industry, and
that industry-wide sentiment
contributes significantly to the poor performance of retail
investors.
Essays on the Investment Decisions of Individual and
Institutional Investors
By
Russell Jame
BSBA, Georgetown University, McDonough School of Business,
2005
Advisor: Jay A. Shanken, Ph.D., Carnegie Mellon University,
1983
A dissertation submitted to the Faculty of the
James T. Laney School of Graduate Studies of Emory University
in partial fulfillment of the requirements for the degree of
Doctor of Philosophy
in Business
2010
Table of Contents
Table of Contents
Page
Introduction
1
First Essay: Organizational Structure and Fund Performance: Pension
Funds vs. Mutual Funds
1. Introduction
3
2. Related Literature
8
3. Data and Descriptive Statistics
9
4. The Investment Decisions of Pension Funds and Mutual Funds
13
5. The Performance of Pension Funds and Mutual Funds
20
6. Conclusion
31
Second Essay: Understanding the S&P 500 Composition Effect:
Evidence from Transaction Data
1. Introduction
32
2. Data and Descriptive Statistics
36
3. Stock Returns Following Index Composition Changes
39
4. Index Fund Trading around Index Composition Changes
41
5. The Effects of Index Composition Changes on Investor Recognition
50
6. Conclusion
58
Third Essay: Retail Investor Industry Herding
1. Introduction
60
2. Data and Descriptive Statistics
64
3. Tests for Industry Herding
67
4. Industry Herding and Industry Returns
73
About this Dissertation
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