The benefits of option use by mutual funds

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• 作者：Markus Natter ; ^{markus.natter@wiwi.uni-augsburg.de" class="auth_mail" title="E-mail the corresponding author} ; Martin Rohleder ^{martin.rohleder@wiwi.uni-augsburg.de" class="auth_mail" title="E-mail the corresponding author} ; Dominik Schulte ^{dominik.schulte@wiwi.uni-augsburg.de" class="auth_mail" title="E-mail the corresponding author} ; Marco Wilkens ^{marco.wilkens@wiwi.uni-augsburg.de" class="auth_mail" title="E-mail the corresponding author}
• 关键词：Mutual funds ; Performance ; Options ; Hedging
• 刊名：Journal of Financial Intermediation
• 出版年：2016
• 出版时间：April 2016
• 年：2016
• 卷：26
• 期：Complete
• 页码：142-168
• 全文大小：672 K

文摘

Based on comprehensive regulatory data on equity mutual fund option use from the SEC's N-SAR filings, we are the first to present consistent evidence that equity funds' option use generates higher risk-adjusted performance. We further show that this is a direct effect of option use and not an indirect effect of other fund characteristics. Option use also directly results in lower systematic risk, as funds show significantly lower market betas during periods of options usage. Finally, mutual funds use options mainly for hedging as they primarily use protective puts and covered calls. These results are independent of known phenomena, such as the low beta anomaly, and robust to tests for endogeneity and a novel 5-factor model including an investable option strategy factor (IOS). Overall, our findings show that mutual fund option use is beneficial to investors and does not pose risk to the financial system as feared by the SEC. Our results are thus important for investors as well as regulators.