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GERAD seminar

Managerial Risk Assessment and Fund Performance: Evidence from Textual Disclosure


Oct 20, 2023   11:00 AM — 12:00 PM

Alan Zhang Florida International University, United States

Alan L. Zhang

Presentation on YouTube.

Fund managers' ability to evaluate risk has important implications for their portfolio management and performance. We use a state-of-the-art deep learning model to measure fund managers' forward-looking risk assessments from their narrative discussions. We validate that managers' negative (positive) risk assessments lead to subsequent decreases (increases) in their portfolio risk-taking. However, only managers who identify negative risk generate superior risk-adjusted returns and higher Sharpe ratios, consistent with the evidence that cautious managers have better intraquarter trading skills and are less subject to overconfidence biases. Only sophisticated investors respond to the narrative-based risk assessment measure, suggesting limited attention by retail investors.

(with Sean Cao and Baozhong Yang)

Gilles Caporossi organizer


Hybrid activity at GERAD
Zoom et salle 4488
Pavillon André-Aisenstadt
Campus de l'Université de Montréal
2920, chemin de la Tour

Montréal Québec H3T 1J4

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