Reference : Mutual Funds’ Returns from Providing Liquidity and Costs of Immediacy
E-prints/Working papers : Already available on another site
Business & economic sciences : Finance
http://hdl.handle.net/10993/16021
Mutual Funds’ Returns from Providing Liquidity and Costs of Immediacy
English
Rinne, Kalle mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Luxembourg School of Finance (LSF) >]
Suominen, Matti mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Law Research Unit >]
2014
No
[en] We present evidence that some mutual funds systematically act as
contrarian traders, and earn returns in the stock market by providing
liquidity to investors that demand immediacy, while others systematically
realize costs of immediacy. On average, the mutual funds’ costs of
immediacy exceed their returns from providing liquidity. The funds with
outflows, flows that correlate with industry flows, high market beta funds,
and funds highly exposed to the momentum strategy suffer the most in
costs of immediacy. The mutual funds’ average underperformance can be
explained with their costs of immediacy. Finally, the funds’ historical costs
of immediacy predict their alphas.
http://hdl.handle.net/10993/16021
http://wwwen.uni.lu/recherche/fdef/luxembourg_school_of_finance_research_in_finance/working_papers

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