Cross-Asset Information Synergy in Mutual Fund Families
51 Pages Posted: 2 May 2018 Last revised: 6 Nov 2018
Date Written: October 31, 2018
Despite common wisdom that equities and bonds are segmented, the organization structure of fund families can offset frictions regarding asset market segmentation. We find that equity funds and corporate bond funds linked within a mutual fund family (sister funds) exhibit a significant co-movement in holdings of commonly-held firms’ equities and bonds. In contrast, we do not find such a pattern for funds in different families. We show that the holding co-movement is driven by information sharing among sister funds, and such funds make more profit-enhancing investment decisions on common holdings, compared to stand-alone funds. Our findings suggest that collaboration between equity funds and bond funds improves fund performance.
Keywords: mutual fund families, equity fund, bond fund, information synergy
JEL Classification: G11, G20, G23, G31
Suggested Citation: Suggested Citation