Cross-Asset Information Synergy in Mutual Fund Families

52 Pages Posted: 2 May 2018 Last revised: 5 Nov 2020

See all articles by Jun Kyung Auh

Jun Kyung Auh

Yonsei University - School of Business; Georgetown University - Department of Finance

Jennie Bai

Georgetown University - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: November 4, 2020

Abstract

Despite the conventional wisdom that the equity and bond markets are segmented, the organizational structure of mutual fund families facilitates information integration between shareholders and creditors, and thus offsets frictions that cause cross-asset segmentation. We find that actively managed equity funds and corporate bond funds exhibit significant comovement in the investment decisions of commonly held firms' securities only when they are affiliated with the same family. This affiliation-induced comovement is caused by information spillovers across shareholders and creditors rather than non-information mechanisms. Synthesizing cross-asset information helps predict future equity returns, and thus creates profits for fund families as a whole. Our findings accentuate the importance of collaboration between equity and bond fund managers, which is understudied and not widely recognized by market participants.

Keywords: mutual fund families, equity fund, bond fund, information synergy

JEL Classification: G11, G20, G23, G31

Suggested Citation

Auh, Jun Kyung and Bai, Jennie, Cross-Asset Information Synergy in Mutual Fund Families (November 4, 2020). Georgetown McDonough School of Business Research Paper No. 3163135, Available at SSRN: https://ssrn.com/abstract=3163135 or http://dx.doi.org/10.2139/ssrn.3163135

Jun Kyung Auh (Contact Author)

Yonsei University - School of Business ( email )

50 Yonsei-ro, Seodaemun-gu
Seoul, 120-749
Korea, Republic of (South Korea)

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States

Jennie Bai

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States

HOME PAGE: http://www.jenniebai.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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