The use of derivatives by investment managers and implications for portfolio performance and risk

Fong, K; Gallagher, DR; Ng, A

The use of derivatives by investment managers and implications for portfolio performance and risk

Fong, K Gallagher, DR Ng, A

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Publisher:: Blackwell
Publication Type:: Journal Article
Citation:: International Review of Finance, 2005, 5 (1-2), pp. 1 - 29
Issue Date:: 2005-01

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Field	Value	Language
dc.contributor.author	Fong, K	en_US
dc.contributor.author	Gallagher, DR	en_US
dc.contributor.author	Ng, A	en_US
dc.date.issued	2005-01	en_US
dc.identifier.citation	International Review of Finance, 2005, 5 (1-2), pp. 1 - 29	en_US
dc.identifier.issn	1369-412X	en_US
dc.identifier.uri	http://hdl.handle.net/10453/10311
dc.description.abstract	This study provides an empirical examination of derivative instruments used by institutional investors. Our analysis provides a unique insight into the role and benefits of derivative securities in active equity portfolio management. We contribute to the literature by using a database that comprises the periodic portfolio holdings and daily trades of institutional fund managers. The consequence of derivative use is analyzed using a number of performance and risk measures. Overall, we find the use of derivatives have a negligible impact on fund returns, and is primarily attributed to low levels of derivative exposure relative to total fund size. We also evaluate how derivatives are used by considering the trading strategies executed by active investment managers. Specifically, option trading patterns are consistent with the execution of momentum trading strategies. This study also documents that active investment managers prefer not to use options markets to engage in informed trading	en_US
dc.publisher	Blackwell	en_US
dc.relation.ispartof	International Review of Finance	en_US
dc.title	The use of derivatives by investment managers and implications for portfolio performance and risk	en_US
dc.type	Journal Article
utslib.citation.volume	1-2	en_US
utslib.citation.volume	5	en_US
utslib.for	150205 Investment and Risk Management	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.consider-herdc	false	en_US
pubs.issue	1-2	en_US
pubs.volume	5	en_US

Abstract:

This study provides an empirical examination of derivative instruments used by institutional investors. Our analysis provides a unique insight into the role and benefits of derivative securities in active equity portfolio management. We contribute to the literature by using a database that comprises the periodic portfolio holdings and daily trades of institutional fund managers. The consequence of derivative use is analyzed using a number of performance and risk measures. Overall, we find the use of derivatives have a negligible impact on fund returns, and is primarily attributed to low levels of derivative exposure relative to total fund size. We also evaluate how derivatives are used by considering the trading strategies executed by active investment managers. Specifically, option trading patterns are consistent with the execution of momentum trading strategies. This study also documents that active investment managers prefer not to use options markets to engage in informed trading

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http://hdl.handle.net/10453/10311