Not just anybody receives a research grant from the Institute for Quantitative Research in Finance (The Q-Group). In fact, the organization typically funds fewer than 20 percent of the proposals it receives each year. Thus, it reflects well on the quality of the finance department faculty at the University of Oregon's Lundquist College of Business that assistant professors Woodrow Johnson and Jonathan Reuter were awarded two of The Q-Group's five $10,000 research grants in December 2005.
Founded in 1966, The Q-Group seeks to improve the operation of the global financial marketplace. To accomplish this goal, it funds academic research proposals that offer unique approaches and insights into problems of significance to investment professionals.
Reuter's grant is supporting his research project titled "The Rise of Teams in Fund Management" (with Massimo Massa and Eric Zitzewitz). Traditionally, mutual funds have been managed by one or two individuals whose names are disclosed to investors. During the past decade, however, a significant number of mutual funds have switched to teams of unnamed managers. Reuter's research seeks to measure the costs and benefits of these distinct fund management structures.
"I am grateful to The Q-Group for funding my research with Massimo Massa and Eric Zitzewitz. I hope our study will provide insights into how mutual fund families manage and market their mutual funds. The Q-Group's support is wonderful recognition of the importance of academic research to practitioners in financial markets," said Reuter.
Johnson is applying his grant to support his project "Who Monitors the Mutual Fund Manager, New or Old Shareholders?" That research tests whether mutual fund shareholders continue to monitor the fund manager after they make their initial investment. Interestingly, Johnson finds that when a mutual fund produces positive returns, shareholders respond by buying more shares of the fund. However, when performance decreases, shareholders tend not to sell.
"The Q-Group grant will help support my computing and travel needs as I continue to study how individual shareholders trade, when they trade, and why they trade," said Johnson.
Both Reuter's and Johnson's grants from The Q-Group further solidify the reputation of the Department of Finance at the Lundquist College of Business. The Journal of Financial Economics has previously ranked the college's finance department tenth best based on the frequency with which its research is cited in articles published in that journal. The department's mutual fund expertise is also among the foremost at any business school in the nation.