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dc.contributor.advisorLeonid Kogan.en_US
dc.contributor.authorKwak, Seung Kien_US
dc.contributor.otherSloan School of Management.en_US
dc.date.accessioned2019-02-05T15:57:26Z
dc.date.available2019-02-05T15:57:26Z
dc.date.copyright2018en_US
dc.date.issued2018en_US
dc.identifier.urihttp://hdl.handle.net/1721.1/120202
dc.descriptionThesis: Ph. D., Massachusetts Institute of Technology, Sloan School of Management, 2018.en_US
dc.descriptionCataloged from PDF version of thesis.en_US
dc.descriptionIncludes bibliographical references.en_US
dc.description.abstractIn the first chapter, I propose a theoretical framework to elucidate how capital from unsophisticated investors (naive money) is associated with fund performance dynamics. In the framework, when naive money invested in a fund exceeds the ideal amount for the manager's skill, it leads funds to under-perform persistently. In contrast, the model predicts that, when the amount of invested naive money is smaller than the ideal size of a fund reflecting the manager's skill, the fund performs the same as the market on a risk-adjusted basis. Empirical results using mutual fund data support this prediction. In the second chapter, I develop a model that characterizes how naive money influences the decisions of active mutual fund managers: in particular, managerial effort, fees, marketing expenses, private benefit-seeking, and risk-taking. My model predicts that managers who receive a surplus of naive money are inclined to reduce their managerial effort, charge higher fees, allocate more resources towards marketing, and pursue their private benefit by sacrificing returns to investors. In addition, it also predicts that a manager is most likely to increase idiosyncratic risk when the amount of invested naive money gets closer to a certain size of the fund that reflects the manager's skill. In the third chapter, I build a model to study how naive money affects funds' survivorship and entry decisions. Sufficient capital provision from unsophisticated investors elongates the survival of unskilled managers. Competition among funds determines the industry equilibrium, and the equilibrium is affected by several key market conditions: the aggregate investment opportunities, the aggregate capital inflows from unsophisticated investors, and the supply of skilled managers. When AM markets are heterogeneous in investor sophistication, the model shows, AM markets with more sophisticated investors (say, hedge fund markets) differentiate from those with less sophisticated investors (say, mutual fund markets). Skilled managers generate more value in hedge fund markets, and choose to enter those markets.en_US
dc.description.statementofresponsibilityby Seung Ki Kwak.en_US
dc.description.tableofcontents1. Theory and Evidence: Mutual Fund Performance Dynamics -- 2. IO of Active Mutual Funds -- 3. IO of the Active AM Industry: Entries and Exits.en_US
dc.format.extent190 pagesen_US
dc.language.isoengen_US
dc.publisherMassachusetts Institute of Technologyen_US
dc.rightsMIT theses are protected by copyright. They may be viewed, downloaded, or printed from this source but further reproduction or distribution in any format is prohibited without written permission.en_US
dc.rights.urihttp://dspace.mit.edu/handle/1721.1/7582en_US
dc.subjectSloan School of Management.en_US
dc.titleInstitutional theory of naive moneyen_US
dc.typeThesisen_US
dc.description.degreePh. D.en_US
dc.contributor.departmentSloan School of Management
dc.identifier.oclc1082523221en_US


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