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Missing the Marks: Dispersion in Corporate Bond Valuations Across Mutual FundsGjergji CiciCollege of William and Mary - Mason School of Business Scott GibsonCollege of William and Mary - Mason School of Business John J. Merrick Jr.College of William and Mary - Mason School of Business July 14, 2010 Journal of Financial Economics, Forthcoming Abstract: We study the dispersion of month-end valuations placed on identical corporate bonds by different mutual funds. Such dispersion is related to bond-specific characteristics associated with liquidity and market volatility. TRACE may have contributed to the general decline in dispersion over our sample period, though other factors most likely played roles. Further tests reveal marking patterns to be consistent with returns smoothing behavior by managers. Funds with ambiguous marking policies and those holding “hard-to-mark” bonds appear more prone to smooth reported returns. From a regulatory perspective, we see little downside to requiring funds to explicitly state their marking standards.
Number of Pages in PDF File: 51 Keywords: mutual funds, bonds, valuation, fair value, corporate bond funds JEL Classification: G19, G29 working papers seriesDate posted: March 22, 2008 ; Last revised: July 14, 2010Suggested CitationContact Information
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