TY  - JOUR
AU  - Huang,Jennifer
AU  - Sialm,Clemens
AU  - Zhang,Hanjiang
TI  - Risk Shifting and Mutual Fund Performance
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14903
PY  - 2009
Y2  - April 2009
UR  - http://www.nber.org/papers/w14903
L1  - http://www.nber.org/papers/w14903.pdf
N1  - Author contact info:
 jennifer_huang
Department of Finance, B6600
Red McCombs School of Business
University of Texas at Austin
Austin, TX 78712

Clemens Sialm
University of Texas at Austin
McCombs School of Business
1 University Station; B6600
Austin, TX 78712
Tel: 512-232-6835
E-Mail: clemens.sialm@mccombs.utexas.edu

Hanjiang Zhang
University of Texas at Austin
McCombs School of Business
1 University Station; B6600
Austin, TX 78712
E-Mail: hanjiang.zhang@mccombs.utexas.edu
AB  - Mutual funds change their risk levels significantly over time. This paper investigates the performance consequences of risk shifting, as well as the economic motivations and the mechanisms of risk shifting. Using a holdings-based measure of risk shifting, we find that funds that increase risk perform worse than funds that keep stable risk levels over time. In addition, funds that expect higher benefits from risk shifting are more likely to increase risk and perform particularly poorly after increasing risk. Our results are consistent with the notion that agency problems, rather than the ability to take advantage of changing investment opportunities, are the likely motivation behind risk shifting behavior.
ER  -