How Are Derivatives Used? Evidence from the Mutual Fund Industry

  title={How Are Derivatives Used? Evidence from the Mutual Fund Industry},
  author={Jennifer Lynch Koski and Jeffrey Pontiff},
Approximately 20% of the 675 equity mutual funds analyzed in this paper invest in derivatives. We compare the return distributions of equity mutual funds that invest in derivatives to those that do not. We also analyze the use of derivatives to affect intertemporal changes in fund risk. Equity mutual funds that invest in derivatives have similar risk and similar net return performance in those that do not. Change in fund risk is negatively related to past performance, but derivatives allow… CONTINUE READING

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