Study On Risk-adjustment Behavior Of Fund Manager Based On Relative Performance Ranking

The topic of this study, using the tournament concept as the framework, focuses on the competitive nature of mutual fund environments how to affect the managers'portfolio decision-making and risk-adjusted behavior. Basing on it, this paper examines whether aim of fund managers is to maximize earnings of fund investors. Therefore, in theory, pays, promoting and collecting funds on fund managers all are related highly on place in a competition. So it concludes that lose managers evaluated during the assessment period attempt to maximize their expected compensation may revise the risk level or alter the composition of their portfolios next months. And winners may want to maintain the place in a competition to revise the risk level. However, Changes of winners are less then losers'. Which adjust attributes to benefit for themselves, but don't serve the best interest of fund investors.This paper researches on close-ended fund and open-ended fund through empirical analysis. The result is that in our fund marketing fund manager can make risk-adjusted behavior basing on place in a competition in medium term. And losers prefer to revise the risk level or alter the composition of their portfolios greatly, especially when marketing competition is fierce.The result is that funds'managers focus on benefit of short term in excess, which needs to be changed. So this paper suggests to perfect internal prompting system and to develop the current system of assessing and reporting fund performances on an annual basis to restrain the potential agency conflict between mutual fund investors and mutual fund managers.