New Economics Papers
on Financial Markets
Issue of 2011‒05‒24
three papers chosen by

  1. On the origins of a Conflict of Interest in the Mutual Fund Industry By Sébastien M. Lemeunier
  2. Window dressing in mutual funds By Agarwal, Vikas; Gay, Gerald D.; Ling, Leng
  3. The stock market reaction to the 2005 non-tradable share reform in China By Andrea Beltratti; Bernardo Bortolotti; Marianna Caccavaio

  1. By: Sébastien M. Lemeunier (Finance Department - ESSEC Business School)
    Abstract: Cet article traite des conflits d'intérêts existant entre les investisseurs et leur conseiller financier. Des contributions antérieures ont apporté des éclairages sur cette question en considérant soit les montants investis soit l'horizon d'investissement des investisseurs. Cet article intègre ces différentes dimensions dans une approche globale. La première partie décrit le système des frais aux Etats-Unis. La seconde, grâce à une simulation numérique, met en évidence le conflit d'intérêt en se concentrant uniquement sur l'horizon d'investissement. La troisième partie traite des changements de variables et leurs conséquences sur les caractéristiques des investisseurs concernés par ce conflit d'intérêts.
    Keywords: OPCVM ; Conseiller financier ; Réglementation ; Conflit d'intérêt
    Date: 2011–02–01
  2. By: Agarwal, Vikas; Gay, Gerald D.; Ling, Leng
    Abstract: This paper introduces two measures to investigate potential window-dressing behavior among mutual fund managers. We show that unskilled managers that perform poorly are more likely to window dress by strategically purchasing winner stocks and selling loser stocks near quarter ends. Further, funds with higher expense ratios and greater portfolio turnover are associated with more window dressing. We also find that funds involved in window dressing perform poorly in the following quarter. Given these adverse effects, we demonstrate how window dressing can exist in equilibrium. Current reporting requirements allow managers up to 60 days' delay to report end of quarter portfolio holdings. We show how window-dressing managers can benefit from incrementally higher fund flows if good performance is realized during the delay period. However, we find that poor performance results in incrementally lower flows than that observed for non-window dressing managers. --
    Keywords: Mutual funds,Window dressing,Portfolio disclosure,Fund flows
    JEL: G11 G20
    Date: 2011
  3. By: Andrea Beltratti (Bocconi University, Department of Finance, Via Roentgen 1, 20136, Milan, Italy.); Bernardo Bortolotti (University of Torino, Corso Unione Sovietica, 218bis, 10134, Turin, Italy.); Marianna Caccavaio (LUISS Guido Carli, Department of Economics and Business, Viale Romania 32, 00197, Rome, Italy.)
    Abstract: During 2005-2006, the Chinese government implemented a reform aimed at eliminating the so-called non-tradable shares (NTS), shares typically held by the State or by politically connected institutional investors that were issued at the early stage of financial market development. Our analysis, based on the time series of risk factors and on the cross section of abnormal returns, confirms that the NTS reform affected stock prices, particularly benefiting small stocks, stocks characterized by historically poor returns, stocks issued by companies with less transparent accounts and poorer governance, and less liquid stocks Historically neglected stocks also witnessed an increase in the volume of trading and market prices. JEL Classification: G14, G28, G32.
    Keywords: Ownership structure, Chinese stock market, Financial reform, Corporate governance, Privatization, Neglected stocks.
    Date: 2011–05

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