Passive-Aggressive Trading: The Supply and Demand of Liquidity by Mutual Funds

Author:

Christoffersen Susan K12,Keim Donald B3,Musto David K3,Rzeźnik Aleksandra4

Affiliation:

1. Rotman School of Management, University of Toronto , Canada

2. Copenhagen Business School , Denmark

3. Wharton School, University of Pennsylvania, USA

4. Schulich School of Business, York University, Canada

Abstract

Abstract Active mutual funds supply liquidity when demanding it becomes uneconomical. They tilt toward cheaper buy trades after inflows deplete their trading ideas, when trading ideas in general run low, and when they have more stocks to supply liquidity to, and their cheaper trades perform worse. Their largest trades are more likely to supply liquidity, explaining why they were not broken up. Funds perform better when they pay more for their buys and perform worse when they pay more for their sells, consistent with the implied value of the trades and the correlation between what a fund trades and what it holds.

Publisher

Oxford University Press (OUP)

Subject

Finance,Economics and Econometrics,Accounting

Cited by 1 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. The Information in Industry-Neutral Self-Financed Trades;Journal of Financial and Quantitative Analysis;2023-02-14

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