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Title:On the use of options by mutual funds: Do they know what they are doing?
Authors:Cici, Gjergji
Palacios, Luis-Felipe
Issue Date:2011
Series/Report no.:CFR working paper 11-08
Abstract:Using detailed holdings of exchange-traded options, we examine how mutual funds use options and how options affect portfolio performance and risk. Options users underperform nonusers by two to three percent per year. The underperformance is especially pronounced for funds that are heavy users of options and employ directional strategies. These findings disprove the claim that mutual funds that use options have either superior talent or possess better information, which they try to leverage in the options market. Additional analysis suggests that active hedging or riskneutral strategies, rather than active risk-taking, is a more likely reason why mutual funds use options.
Is replaced by the following version:http://hdl.handle.net/10419/70483
Document Type:Working Paper
Appears in Collections:CFR Working Papers, Centre for Financial Research (CFR), Universität Köln

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