An analysis of the use of derivatives by the Canadian mutual fund industry

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal

4 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)947-970
Journal / PublicationJournal of International Money and Finance
Volume23
Issue number6
StatePublished - Oct 2004
Externally publishedYes

Abstract

In this paper we examine the use of derivatives by mutual funds in Canada. First, both the incidence and extent of derivatives usage are low. Second, larger, growth-oriented, domestic equity funds are more likely to use derivatives. We then compare returns and risks between derivative users and non-users with the following findings: (1) There exist no differences between users and non-users for foreign equity funds; (2) For fixed-income funds, users have higher returns and risks than non-users; (3) For domestic equity funds, users have lower returns but higher risks than non-users; however, the differentials disappear if warrants are excluded from the definition of derivatives. © 2004 Elsevier Ltd. All rights reserved.

Research Area(s)

  • Derivatives, Mutual funds, Return and risk, Risk management