Date Available
5-15-2026
Year of Publication
2024
Degree Name
Doctor of Philosophy (PhD)
Document Type
Doctoral Dissertation
College
Business and Economics
Department/School/Program
Finance and Quantitative Methods
First Advisor
Dr. Russell Jame
Abstract
My first chapter shows that disruptions in derivative markets can propagate to corporate bond markets via mutual funds that hold both fixed-income securities and derivatives. The transmission arises because when fund managers incur losses in their derivative investments, they are obligated to deliver cash payments to counterparties or provide additional cash collateral to meet margin calls. Using the Covid-19 crisis as an adverse shock on derivative investments bond funds made in 2019 Q4, I find that funds with substantial exposure to derivative market disruptions liquidate fixed-income assets to fulfill corresponding payment obligations. The forced liquidations cause sizable price depressions in bond markets. Furthermore, the fire-sale spills over onto derivative nonusers that hold the same fixed-income securities, producing additional forced selloffs and second-round downward pressure on sold bonds. Overall, these findings suggest that asset managers investing in relatively segmented markets could transmit an adverse shock from one market to another, and such a cross-market linkage has the potential to exacerbate systematic risks within the financial system.
The second chapter explores how hedge funds exploit equity anomalies and the consequences of their arbitrage activities. Hedge fund managers who passively employ anomalies hardly deliver superior returns. Skilled arbitrageurs exploit anomalies by dynamically varying their portfolio exposure to anomaly-based strategy. I find robust evidence of anomaly-timing ability among top-ranked hedge funds. Top anomaly-timing funds earn 1.49% higher annualized abnormal returns than their bottom counterparts. Furthermore, the documented outperformance becomes stronger when systematic mispricing is prominent. Specifically, anomaly-timing funds only exploit severely mispriced stocks in short-side anomaly portfolios, realize superior performance following market-wide mispricing corrections, and require compensations for bearing arbitrage risks.
Digital Object Identifier (DOI)
https://doi.org/10.13023/etd.2024.182
Recommended Citation
Qi, Quan, "Two Essays on Asset Management" (2024). Theses and Dissertations--Business Administration. 9.
https://uknowledge.uky.edu/busadmin_etds/9
