Essays on equity portfolio management

Abstract

Essays on Equity Portfolio Management This dissertation contains three essays involving empirical research in the area of equity portfolio management. Specifically, two of the essays contribute to the existing funds management literature by examining issues concerning portfolio performance evaluation and asset allocations. These being, equity fund benchmark mismatching, and equity fund industry allocations during the Australian mining boom. The third essay investigates issues relating to socially responsible investing. The first essay uses Australian equity fund data to examine the appropriateness of equity funds’ self-reported benchmarks. Given the lack of regulation surrounding the benchmarking of Australian managed funds and the absence of publicly available equity style indices, this essay explores if fund benchmarks are able to adequately capture passive investment styles and whether funds are better suited to alternative benchmarks. This essay further explores if funds with inappropriate benchmarks are able to outperform relatively, on account of the strategic nature of managers to report underperforming benchmarks, and whether this influences asset flows. The final essay of this dissertation provides a measure for the value of this non-financial satisfaction that accrues to individuals from investing in a socially responsible manner. This non-financial benefit is referred to as the “psychic dividend” of SRI. Previous studies attempt to quantify this value as the difference in certainty equivalent returns of SRI and non-SRI portfolios. This chapter extends the definition of certainty equivalence to consider constant relative risk aversion and loss aversion.