Informed Trading of Mutual Funds: Evidence from Fund‐Underwriter Relationships

Hyoseok (David) Hwang

doi:10.1111/fima.12230

journal article Jul 20, 2018

Informed Trading of Mutual Funds: Evidence from Fund‐Underwriter Relationships

Hyoseok (David) Hwang

Financial Management Vol. 48 No. 1 pp. 311-338 · Wiley

View at Publisher Save 10.1111/fima.12230

Abstract

AbstractThis paper investigates whether the relationship between investment banks and their affiliated funds helps the funds deliver superior performance due to the information advantage or whether it costs the funds due to the conflict of interest. Using firms with class‐action lawsuits, I examine whether underwriter‐affiliated funds can avoid a potential economic loss from the underwriting clients’ fraudulent activities. Consistent with the information advantage hypothesis, I find that affiliated funds reduce their stakes in underwritten firms before the disclosure of the firms’ misconduct. Additionally, I find that significant selling activity by the affiliated funds can predict the outcome of a potential lawsuit.

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References

Details

Published: Jul 20, 2018
Vol/Issue: 48(1)
Pages: 311-338
License: View

Authors

H

Hyoseok (David) Hwang

Cite This Article

Hyoseok (David) Hwang (2018). Informed Trading of Mutual Funds: Evidence from Fund‐Underwriter Relationships. Financial Management, 48(1), 311-338. https://doi.org/10.1111/fima.12230

Informed Trading of Mutual Funds: Evidence from Fund‐Underwriter Relationships

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