1,720,968 research outputs found
Impact of reporting delays on profitability of front-running strategies against mutual funds
No full text
Purpose
The purpose of this paper is to investigate if there is any impact of reporting delays on profitability of front-running strategies against the mutual funds.
Design/methodology/approach
The author studies if freshness of mutual fund holding information from public disclosures affects precision of flow-based front-running strategies against the funds and if the allowed 60-day reporting delay is able to protect the funds from these front-running activities against them.
Findings
Assuming no reporting delay, the author finds that returns from hypothetical front-running strategies are significant, when these are based on the most recent holding information and are not significant, when based on relatively old holding information. Interestingly, these front-running returns appear to be mostly driven by anticipated forced buys by the mutual funds (rather than anticipated forced sales). The return from a front-running strategy long on anticipated forced buys is higher when it is based on relatively illiquid assets. The author also finds that return from a front-running strategy short on anticipated forced sales is significant, when it is based on illiquid assets from relatively old holding information.
Practical implications
Hence, it appears that the allowed 60-day reporting delay is able to protect most of the funds from front-running activities against them, except for the funds holding illiquid assets from anticipated forced sales motivated front-running activities against them.
Originality/value
The paper addresses an interesting question, which has not been studied before – if freshness of fund holding information helps the front-running strategies against the funds and if the allowed reporting delay is effective in protecting the funds from these activities.
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Early-pandemic repricing of housing attributes: evidence from Middlesex County, Boston suburbs
No full textThis paper examines how the abrupt shift to remote work during the early COVID-19 period changed the implicit prices of housing attributes in Middlesex County, Massachusetts, a suburban region adjacent to Boston. Using nearly 40,000 single-family home sales from 2017 to 2021, I estimate a hedonic price model in a difference-in-differences framework, comparing inner suburbs, outer suburbs, and exurbs before and after the pandemic\u27s onset. I find that outer suburban and exurban home prices appreciated significantly more than those in the inner suburbs. In the outer suburbs, price premiums for proximity to railway stations and garages declined, suggesting that homebuyers anticipated less frequent commuting. Conversely, price premiums for features supporting remote work, such as additional bathrooms, increased across all regions, with home offices, outdoor spaces, and extra bedrooms particularly valued in the inner suburbs. These findings provide novel evidence of an early-pandemic revaluation of home values by shifts in work arrangements and locational preferences. The study contributes to asset pricing literature by showing how macroeconomic shocks and behavioral shifts drive real estate revaluation, offering insights for investors and policymakers. © 2025 Elsevier Inc
Essays on delegated portfolio management
No full textThis thesis contains three essays on delegated portfolio management and deals with
issues such as impact of regulations on mutual fund performance, impact of competition
on transparency in financial markets and strategic trading behaviour of agents in illiquid
markets.
Chapter 1 analyses the impact of more frequent portfolio disclosure on mutual funds
performance. Since 2004, SEC requires all U.S. mutual funds to disclose their portfolio
holdings on a quarterly basis from semi-annual previously. This change in regulation provides
a natural setting to study the impact of disclosure frequency on the performance of mutual
funds. Prior to the policy change, it finds that the semi-annual funds with high abnormal
returns in the past year outperform the corresponding quarterly funds by 17-20 basis points a
month. This difference in performance disappears after 2004. The reduction in performance
is higher for semi-annual funds holding illiquid assets than those holding liquid assets. These
results support the hypothesis that performance of funds with more disclosure suffers more
from activities such as front running.
Chapter 2 analyses the impact of competition in financial markets on incentives to re-
veal information. It finds that discretionary portfolio disclosure and advertising expenses of
mutual funds decrease with competition. This supports the theory that mutual funds use
portfolio disclosure and advertising as marketing tools to attract new investments in a financial market, where superior relative performance and greater visibility are rewarded with
convex payoffs. With higher competition, the likelihood of landing new investments goes
down for each fund while the cost of disclosure goes up. Funds respond by cutting down on
costly disclosures and advertising activities. Thus competition seems to have adverse impact
on market transparency and search cost.
3Chapter 3 develops a model of strategic trading to study forced liquidation. Traders who
hold an illiquid risky security have to satisfy minimum capital requirements, or liquidate their
position. Therefore, traders with price impact can induce the fire sale of others to benefit
from future low prices. It shows that if traders have similar proportions of wealth invested
in the risky security, or the market is sufficiently liquid, they behave cooperatively and
smooth their orders over several trading periods. However, if the proportions are significantly
different across agents, and market liquidity is low, the strong agent, who is less exposed to
the risky asset, predates on the weak agent, and forces her to exit the market
The impact of salient fees: Evidence from the mutual fund market
No full textIn 2004 the SEC began requiring mutual funds to include the dollar amount of fund fees in shareholders reports. Before that, funds reported returns net of fees and didn\u27t disclose fees separately. This natural experiment allows me to study the impact of separate reporting of fees on the level of fund fees. I find that average reported retail fund fees decreased by 27 basis points during the five-year period after the change in this rule, compared to the five-year period before the change. This reduction in fees was much higher for funds with higher fees and more volatile returns. I also find that fund investment became more sensitive to fund fees after 2004. These findings support the narrative that reporting of mutual fund fees separately in dollars made fund fees more salient and helped increase fee awareness among the investors, which, in turn, forced mutual funds to decrease fees. © 202
Essays on delegated portfolio management
Get PDFThis thesis contains three essays on delegated portfolio management and deals with issues such as impact of regulations on mutual fund performance, impact of competition on transparency in financial markets and strategic trading behaviour of agents in illiquid markets. Chapter 1 analyses the impact of more frequent portfolio disclosure on mutual funds performance. Since 2004, SEC requires all U.S. mutual funds to disclose their portfolio holdings on a quarterly basis from semi-annual previously. This change in regulation provides a natural setting to study the impact of disclosure frequency on the performance of mutual funds. Prior to the policy change, it finds that the semi-annual funds with high abnormal returns in the past year outperform the corresponding quarterly funds by 17-20 basis points a month. This difference in performance disappears after 2004. The reduction in performance is higher for semi-annual funds holding illiquid assets than those holding liquid assets. These results support the hypothesis that performance of funds with more disclosure suffers more from activities such as front running. Chapter 2 analyses the impact of competition in financial markets on incentives to re- veal information. It finds that discretionary portfolio disclosure and advertising expenses of mutual funds decrease with competition. This supports the theory that mutual funds use portfolio disclosure and advertising as marketing tools to attract new investments in a financial market, where superior relative performance and greater visibility are rewarded with convex payoffs. With higher competition, the likelihood of landing new investments goes down for each fund while the cost of disclosure goes up. Funds respond by cutting down on costly disclosures and advertising activities. Thus competition seems to have adverse impact on market transparency and search cost. 3Chapter 3 develops a model of strategic trading to study forced liquidation. Traders who hold an illiquid risky security have to satisfy minimum capital requirements, or liquidate their position. Therefore, traders with price impact can induce the fire sale of others to benefit from future low prices. It shows that if traders have similar proportions of wealth invested in the risky security, or the market is sufficiently liquid, they behave cooperatively and smooth their orders over several trading periods. However, if the proportions are significantly different across agents, and market liquidity is low, the strong agent, who is less exposed to the risky asset, predates on the weak agent, and forces her to exit the market
Impact of competition on fund disclosures and consumer search costs
No full textPurpose: The purpose of this paper is to investigate the impact of competition in financial markets on the frequency of portfolio disclosures by mutual funds and its implications for consumer search costs. Design/methodology/approach: The empirical analysis merges the Center for Research in Security Prices (CRSP) survivorship bias-free mutual fund database, the Thompson Financial CDA/ Spectrum holdings database and the CRSP stock price data. The sample covers the time period between 1993 and 2010 and OLS and logistic regressions are used to investigate the impact of competition on fund disclosures. Findings: This paper finds that mutual fund disclosures decrease with market competition and this effect is amplified for funds holding illiquid assets. These results provide empirical support for the findings of Carlin et al. (2102). Mutual funds use portfolio disclosures as a marketing tool to attract investments in a tournament-like market, where superior relative performance and greater visibility are rewarded with convex payoffs. With competition, the likelihood of receiving new investments decreases for each fund and funds respond by reducing costly voluntary disclosures. The disclosure costs are higher for funds holding illiquid assets, and hence, the effect is stronger for them. Originality/value: This paper has important policy implications for disclosures in a market where relative performance matters. The traditional view is that competition induces voluntary disclosure because entities would like to differentiate themselves from competitors, and hence, competition should increase market transparency. However, this paper sheds light on the negative consequence of competition in a tournament-like mutual fund market
Mutual fund investor response to climate activism: Evidence from the 2019 Global Climate Strike
No full textThis study examines the impact of the March 2019 Global Climate Strike on U.S. mutual fund flows, addressing a gap in the literature on how climate activism influences fund investment behavior. Using a sample of U.S. equity funds and an event study methodology, we find that low-carbon funds receive significantly higher net inflows than high-carbon funds during the strike month and the following two months. This effect is stronger for retail investors relative to institutional investors. Additionally, the study examines the impact of Morningstar\u27s continuous carbon risk metrics on investment decisions. Together, our findings suggest that the climate strike heightened awareness of climate risks, prompting increased investment in low-carbon funds. This response underscores the effectiveness of climate activism in driving investment toward a low-carbon economy. © 2025 Elsevier B.V
The impact of more frequent portfolio disclosure on mutual fund performance
No full textThis paper analyzes the impact of more frequent portfolio disclosures on performance of mutual funds. Since 2004, SEC requires all U.S. mutual funds to disclose their portfolio holdings on a quarterly basis from semi-annual previously. This change in regulation provides a natural setting to study the impact of frequency of disclosure on performance of mutual funds. Prior to the policy change, we find that successful semi-annual funds outperform successful quarterly funds by 17–20 basis points a month. After 2004, their performance goes down and they no longer outperform successful quarterly funds. This reduction in performance is higher for semi-annual funds holding illiquid assets. These results support our hypothesis that the performance of funds with more frequent disclosure, particularly of those holding illiquid assets, suffer more from front running activities. We also find complementary evidence that the profitability of a hypothetical front running strategy based on public disclosures goes up with the frequency of portfolio disclosures
Impact of Competition on Mutual Fund Marketing Expenses
No full textIn this paper, I study the impact of market competition on mutual fund marketing expenses. In a sample of US domestic equity mutual funds, I find that marketing expenses decrease with the competition. This effect is stronger for top-performing funds. These results are counterintuitive, as one would ordinarily expect funds to incur more marketing expenses in response to pressure from competing funds. However, these results support the narrative that mutual funds employ marketing to draw attention to their performance in a tournament-like market, where the top-performing funds (the winners) are rewarded with disproportionately high new investments. Higher competition decreases the chances of each fund to outperform the others and adversely affect their ability to attract new investments, and the funds respond by decreasing marketing expenses. Thus, competition appears to have implications for investor search cost
Climate policy regime change and mutual fund flows: Insights from the 2020 US election
No full textPresident Biden campaigned and was elected on a bold “clean energy revolution,” a pledge that drastically reshaped expectations surrounding US climate policy. We study how mutual fund investors respond to this significant shift in environmental priorities. We find that low-carbon funds attract (or retain) $15 billion more investments than high-carbon funds during the three months after the 2020 election compared with the three months before. We also find that low-carbon funds underperform high-carbon funds by between 0.47 % and 0.89 % a month during the same period. These results indicate that Biden\u27s election heightens climate transition risk awareness, prompting investors to hedge this risk by investing more in low-carbon funds and receiving lower returns. The flow effect is more pronounced among retail investors, emphasizing their increased recognition of climate transition risk. We also uncover an interesting clientele effect: investors in low-carbon funds consider continuous carbon risk measures, whereas investors in high-carbon funds do not. Furthermore, our analysis of a US-only fund sample reveals that sensitivity to climate risk is insignificant in 2018 after Morningstar first published low-carbon metrics (unlike Ceccarelli, Ramelli, & Wagner, 2024) but becomes particularly significant following the 2020 election
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