Abstract

http://ssrn.com/abstract=1364707
 
 

References (41)



 
 

Citations (8)



 


 



Asset Fire Sales, Liquidity Provision, and Mutual Fund Performance


Hanjiang Zhang


Nanyang Technological University - Nanyang Business School

March 18, 2009


Abstract:     
This paper investigates whether some mutual funds benefit from providing liquidity to other funds in financial distress - those that are experiencing severe money outflows. Forced trades by distressed funds generate temporary downward price pressure on securities held in common by these funds and therefore create trading opportunities for outside investors. This paper shows that some mutual fund managers have the ability to consistently identify and purchase these fire-sale stocks and that they benefit from providing liquidity to distressed funds. Moreover, these managers exhibit overall investment skills beyond identifying fire-sale stocks, which lead to superior performance in the rest of their portfolios. The performance results remain robust after adjusting for risk and controlling for fund attributes, such as fund flows and turnover.

Number of Pages in PDF File: 45

Keywords: Liqudity Provision, Mutual Fund Performance, Financial Distress, Price Pressure

JEL Classification: G10, G14, G23

working papers series


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Date posted: March 23, 2009  

Suggested Citation

Zhang, Hanjiang, Asset Fire Sales, Liquidity Provision, and Mutual Fund Performance (March 18, 2009). Available at SSRN: http://ssrn.com/abstract=1364707 or http://dx.doi.org/10.2139/ssrn.1364707

Contact Information

Hanjiang Zhang (Contact Author)
Nanyang Technological University - Nanyang Business School ( email )
S3-B1A-05 Nanyang Avenue
Singapore, 639798
Singapore
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References:  41
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