Valuable Information and Costly Liquidity: Evidence from Individual Mutual Fund Trades

36 Pages Posted: 5 Feb 2007

See all articles by Susan Kerr Christoffersen

Susan Kerr Christoffersen

University of Toronto - Rotman School of Management; Copenhagen Business School

Donald B. Keim

University of Pennsylvania - Wharton School

David K. Musto

University of Pennsylvania - Finance Department

Date Written: November 19, 2006

Abstract

Until recently, all Canadian mutual funds were required to disclose all their individual trades, offering a unique and ideal opportunity to measure and analyze the cost and performance of mutual funds' trades. We find that active management delivers both cheaper trades and better subsequent performance, and that the dissipative effect of flow-driven transactions costs is primarily through forced sales. Fund size associates with both cheaper trades and better subsequent performance, and a series of trades predicts more price movement in the predicted direction, indicating the value to funds of keeping their trading anonymous.

Keywords: mutual funds, trading, trading costs

JEL Classification: G10, G23

Suggested Citation

Christoffersen, Susan E. and Keim, Donald B. and Musto, David K., Valuable Information and Costly Liquidity: Evidence from Individual Mutual Fund Trades (November 19, 2006). Available at SSRN: https://ssrn.com/abstract=951501 or http://dx.doi.org/10.2139/ssrn.951501

Susan E. Christoffersen

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416 946 5647 (Phone)
416 971 3048 (Fax)

HOME PAGE: http://www.rotman.utoronto.ca/schristoffersen

Copenhagen Business School

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Donald B. Keim

University of Pennsylvania - Wharton School ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-7685 (Phone)
215-898-6200 (Fax)

David K. Musto (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
467
Abstract Views
2,206
rank
61,833
PlumX Metrics