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Missing the Marks: Dispersion in Corporate Bond Valuations Across Mutual Funds


Gjergji Cici


College of William and Mary - Mason School of Business

Scott Gibson


College 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 series


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Date posted: March 22, 2008 ; Last revised: July 14, 2010

Suggested Citation

Cici, Gjergji and Gibson, Scott and Merrick, John J., Missing the Marks: Dispersion in Corporate Bond Valuations Across Mutual Funds (July 14, 2010). Journal of Financial Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1104508 or http://dx.doi.org/10.2139/ssrn.1104508

Contact Information

Gjergji Cici (Contact Author)
College of William and Mary - Mason School of Business ( email )
P.O. Box 8795
Williamsburg, VA 23187-8795
United States
757-221-1826 (Phone)
George Scott Gibson
College of William and Mary - Mason School of Business ( email )
P.O. Box 8795
Williamsburg, VA 23187-8795
United States
757/221-1673 (Phone)
John J. Merrick Jr.
College of William and Mary - Mason School of Business ( email )
P.O. Box 8795
Williamsburg, VA 23187-8795
United States
757-221-2721 (Phone)
757-221-2937 (Fax)
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