Trading Efficiency of Fund Families: Impact on Fund Performance and Investment Behavior

EFA 2015 Vienna Meetings Paper

47 Pages Posted: 24 Oct 2014 Last revised: 12 Jan 2016

See all articles by Gjergji Cici

Gjergji Cici

University of Kansas - School of Business

Laura Dahm

University of Cologne - Department of Finance & Centre for Financial Research (CFR)

Alexander Kempf

University of Cologne - Department of Finance & Centre for Financial Research (CFR)

Date Written: December 22, 2015

Abstract

This study examines how the efficiency of trading desks operated by mutual fund families affects the performance and trading of affiliated funds. We estimate the trading efficiency of a fund family’s trading desk as the difference between the gross return of the family’s index fund, which incorporates trading costs, and the return of the underlying index, which does not incorporate trading costs, around index adjustment dates. By operating more efficient trading desks that help reduce trading costs, fund families improve the performance of their funds significantly and also enable their funds to trade more and hold less liquid portfolios.

Keywords: Mutual funds; fund families; trading efficiency; fund performance; investment behavior

JEL Classification: D23; G23; G24

Suggested Citation

Cici, Gjergji and Dahm, Laura and Kempf, Alexander, Trading Efficiency of Fund Families: Impact on Fund Performance and Investment Behavior (December 22, 2015). EFA 2015 Vienna Meetings Paper, Available at SSRN: https://ssrn.com/abstract=2514203 or http://dx.doi.org/10.2139/ssrn.2514203

Gjergji Cici (Contact Author)

University of Kansas - School of Business ( email )

Capitol Federal Hall
1654 Naismith Drive
Lawrence, KS 66045
United States
785-864-3873 (Phone)

HOME PAGE: http://business.ku.edu/gjergji-cici

Laura Dahm

University of Cologne - Department of Finance & Centre for Financial Research (CFR) ( email )

Albertus-Magnus Platz
Cologne, 50923
Germany

Alexander Kempf

University of Cologne - Department of Finance & Centre for Financial Research (CFR) ( email )

Cologne, 50923
Germany
+49 221 470 2714 (Phone)
+49 221 470 3992 (Fax)

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