Liquidity Picking and Fund Performance

61 Pages Posted: 20 Jul 2020

See all articles by Feng Jiao

Feng Jiao

University of Lethbridge - Faculty of Management

Sergei Sarkissian

McGill University; University of Edinburgh

David Schumacher

McGill University

Date Written: July 14, 2020

Abstract

Using global mutual fund and ADR data, we test if funds strategically trade cross-listed firms’ equity in the most liquid location – the United States or the domestic market. Funds that show such liquidity picking behaviour outperform those that do not. This result is robust to various performance tests, driven by superior stock-picking ability of both cross-listed and non-cross-listed stocks, and stronger for high active share funds. Liquidity picking mitigates funds’ capacity constraints and creates $41.7 million in value-added for funds in the top tertile. Our tests provide direct evidence in favour of theories of informed trading in a multi-market setting.

Keywords: Fund holdings, Liquidity management, Performance persistence, Stock selection

JEL Classification: G15, G23

Suggested Citation

Jiao, Feng and Sarkissian, Sergei and Schumacher, David, Liquidity Picking and Fund Performance (July 14, 2020). Available at SSRN: https://ssrn.com/abstract=3651339 or http://dx.doi.org/10.2139/ssrn.3651339

Feng Jiao

University of Lethbridge - Faculty of Management ( email )

4401 University Drive
Lethbridge, Alberta TIK 3M4
Canada

Sergei Sarkissian (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
514-398-4876 (Phone)
514-398-3876 (Fax)

HOME PAGE: http://sergei-sarkissian.com

University of Edinburgh

29 Buccleuch Pl.
Edinburgh, Scotland EH8 9JS
United Kingdom

David Schumacher

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
5143984778 (Phone)

HOME PAGE: http://www.davidschumacher.info

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