Abstract

http://ssrn.com/abstract=1364974
 
 

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Mutual Fund Trading Pressure: Firm-Level Stock Price Impact and Timing of SEOs


Mozaffar Khan


Harvard Business School; University of Minnesota - Twin Cities - Carlson School of Management

Leonid Kogan


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

George Serafeim


Harvard University - Harvard Business School

June 23, 2011

AFA 2010 Atlanta Meetings Paper

Abstract:     
We use price pressure resulting from purchases by mutual funds with large capital inflows to identify overvalued equity. This is a relatively exogenous overvaluation indicator as it is associated with who is buying – buyers with excess liquidity – rather than what is being purchased. We document substantial stock price impact associated with purchases by high-inflow mutual funds, and find the probability of an SEO, insider sales, and the probability of a stock-based acquisition increase significantly in the four quarters following the mutual fund buying pressure. These results provide new evidence that firm managers are able to identify and exploit overvalued equity.

Number of Pages in PDF File: 47

Keywords: SEO, Market Timing, Price Impact, Trading Pressure, Mutual Fund

JEL Classification: G10, G11, G12, G14, G23, G30, G32

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Date posted: March 19, 2009 ; Last revised: July 8, 2011

Suggested Citation

Khan, Mozaffar and Kogan, Leonid and Serafeim, George, Mutual Fund Trading Pressure: Firm-Level Stock Price Impact and Timing of SEOs (June 23, 2011). AFA 2010 Atlanta Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1364974 or http://dx.doi.org/10.2139/ssrn.1364974

Contact Information

Mozaffar Khan (Contact Author)
Harvard Business School ( email )
Soldiers Field Road
Morgan 362
Boston, MA 02163
United States
University of Minnesota - Twin Cities - Carlson School of Management ( email )
19th Avenue South
Minneapolis, MN 55455
United States
Leonid Kogan
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
50 Memorial Drive
Cambridge, MA 02142
United States
617-253-2289 (Phone)
617-258-6855 (Fax)
HOME PAGE: http://web.mit.edu/lkogan2/www/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
George Serafeim
Harvard University - Harvard Business School ( email )
381 Morgan Hall
Boston, MA 02163
United States
HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=15705
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