A Horizon‐Based Decomposition of Mutual Fund Value Added Using Transactions

Author:

BINSBERGEN JULES VAN,HAN JUNGSUK,RUAN HONGXUN,XING RAN

Abstract

ABSTRACTWe decompose mutual fund value added by the length of funds' holdings using transaction‐level data. We motivate our decomposition with a model featuring horizon‐specific investment ideas, where short‐term ideas are less scalable because the associated trades cannot be spread over time. Fund turnover correlates negatively with the horizon over which value is added and positively with price impact costs. As predicted, holdings of high‐turnover funds add a substantial amount of value in the first two weeks, of which more than 80% is earned on Federal Open Market Committee (FOMC) and earnings announcement days. Holdings of low‐turnover funds add value only over longer horizons.

Publisher

Wiley

Cited by 2 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

1. Informed Voting;The Review of Financial Studies;2024-08-16

2. Flow-Induced Trading: Evidence from the Daily Trading of Municipal Bond Mutual Funds;SSRN Electronic Journal;2024

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