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https://ssrn.com/abstract=2735959
 
 

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Litigations and Mutual Fund Runs


Meijun Qian


Australian National University (ANU) - College of Business and Economics

Başak Tanyeri


Bilkent University


Melbourne Business School, 2016 Financial Institutions, Regulation & Corporate Governance (FIRCG) Conference

Abstract:     
This paper investigates whether anticipation of adverse events (litigations over market-timing and late-trading) can trigger runs in mutual funds. We find that runs start as early as four months before litigation announcements. The pre-event runs over a six-month window accumulate to 4.95% of total net assets and post-event runs last over two years and accumulate to 7.94% for the first six months window. Additionally, investors who run before litigation announcements earn significantly higher risk- and peer-adjusted returns, as high as 1.16% more than those who run after. The difference in returns is particularly high for funds holding illiquid assets. Our analysis suggests that a pro-rata ownership design does not suffice to prevent runs in mutual funds.

Number of Pages in PDF File: 33

Keywords: Mutual fund flows, runs, and returns

JEL Classification: G23, G14


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Date posted: February 22, 2016 ; Last revised: February 23, 2016

Suggested Citation

Qian, Meijun and Tanyeri, Başak, Litigations and Mutual Fund Runs. Melbourne Business School, 2016 Financial Institutions, Regulation & Corporate Governance (FIRCG) Conference. Available at SSRN: https://ssrn.com/abstract=2735959 or http://dx.doi.org/10.2139/ssrn.2735959

Contact Information

Meijun Qian
Australian National University (ANU) - College of Business and Economics ( email )
Canberra
Australia
Başak Tanyeri (Contact Author)
Bilkent University ( email )
06533 Bilkent, Ankara
Turkey
903122901871 (Phone)
HOME PAGE: http://www.bilkent.edu.tr/~basak
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