Abstract

http://ssrn.com/abstract=2020662
 
 

References (57)



 


 



Mutual Fund Competition and Profiting from the Post Earnings Announcement Drift


Ashiq Ali


University of Texas at Dallas - Naveen Jindal School of Management

Xuanjuan Chen


Shanghai University of Finance and Economics

Tong Yao


University of Iowa - Henry B. Tippie College of Business

Tong Yu


University of Rhode Island - College of Business Administration

April 2015


Abstract:     
We examine how competition affects the performance of mutual funds trading on the post earnings announcement drift (PEAD) strategy. Mutual funds aggressively pursuing this strategy on average do not generate significant outperformance. However, some of them manage to encounter low competition and deliver superior performance. These funds tend to hold and trade on stocks with low liquidity and high volatility. Our findings suggest that some funds have skills to profitably implement the PEAD strategy while avoid crowded trades, and that for these low-competition funds, the benefit of reduced competition outweighs the potential costs of trading on illiquid and volatile stocks.

Number of Pages in PDF File: 56

Keywords: mutual funds, competition


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Date posted: March 14, 2012 ; Last revised: May 4, 2015

Suggested Citation

Ali, Ashiq and Chen, Xuanjuan and Yao, Tong and Yu, Tong, Mutual Fund Competition and Profiting from the Post Earnings Announcement Drift (April 2015). Available at SSRN: http://ssrn.com/abstract=2020662 or http://dx.doi.org/10.2139/ssrn.2020662

Contact Information

Ashiq Ali
University of Texas at Dallas - Naveen Jindal School of Management ( email )
800 West Campbell Road, SM41
Richardson, TX 75080-3021
United States
972-883-6360 (Phone)
972-883-6811 (Fax)
HOME PAGE: http://www.utdallas.edu/~axa042200/
Xuanjuan Chen
Shanghai University of Finance and Economics ( email )
777 Guoding Road
Shanghai, Shanghai 200433
China
Tong Yao (Contact Author)
University of Iowa - Henry B. Tippie College of Business ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
Tong Yu
University of Rhode Island - College of Business Administration ( email )
Kingston, RI 02881
United States
(401) 874-7415 (Phone)
(401) 874-4312 (Fax)
HOME PAGE: http://www.cba.uri.edu/tong
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