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

Hyoseok (David) Hwang

Financial Management, 2019, vol. 48, issue 1, 311-338

Abstract: This 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.

Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://doi.org/10.1111/fima.12230

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:finmgt:v:48:y:2019:i:1:p:311-338

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0046-3892

Access Statistics for this article

Financial Management is currently edited by William G. Christie

More articles in Financial Management from Financial Management Association International Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().