Bank-related asset management firm and risk taking in mutual fund tournament: Evidence from Asean economic community

Abstract

© 2015 ASERS Publishing House. All rights reserved. We examine risk-taking behavior of mutual funds in ASEAN Economic Community by applying parametric approach to determine whether it complies with the tournament hypothesis. The “winner” mutual funds tend to reduce their risk in the second half of the year to maintain their status or ranking, while the “loser” mutual funds adjust their portfolios to be riskier in the expectation of a better result by the end of the year. In the market that dominated by commercial bank-related asset management companies, we find solid evidence that the winner funds reduce their portfolio risk, while the loser funds increase their exposure. The type of asset management company affects funds’ risk-taking behavior. Bank-related winner funds exhibit higher risk-taking behavior in the second half of the year compared to non-bank related funds.