Tail Risk and the Cross-Section of Mutual Fund Expected Returns


We test for the presence of a tail risk premium in the cross-section of mutual fund returns and find that the top tail risk quintile of funds outperforms the bottom by 4.4% per annum. This premium is not simply a reward for market risk, nor do commonly used risk factors offer an adequate explanation. Our findings hold across double-sorted portfolios formed on tail risk and a number of fund characteristics. We also find that funds susceptible to tail risk tend to be small, young, have high management fees, and have managers who do not risk their own capital.

Publication DOI: https://doi.org/10.1017/S0022109018000650
Divisions: Aston Business School
Aston Business School > Economics, Finance & Entrepreneurship
Additional Information: The final publication is available via Cambridge Journals Online at https://doi.org/10.1017/S0022109018000650
Uncontrolled Keywords: Accounting,Finance,Economics and Econometrics
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Related URLs: https://www.cam ... 70102AD0405941E (Publisher URL)
http://www.scop ... tnerID=8YFLogxK (Scopus URL)
PURE Output Type: Article
Published Date: 2019-02-01
Published Online Date: 2018-08-24
Accepted Date: 2017-09-01
Authors: Karagiannis, Nikolaos
Tolikas, Konstantinos ( 0000-0001-8281-0709)



Version: Accepted Version

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