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The Efficiency of Net Asset Values for Asian-Country Mutual Funds in the US

Oscar Varela

Journal of Business Finance & Accounting, 2002, vol. 29, issue 5&6, 761-786

Abstract: The net asset values for Asian-country mutual funds in the US come from the underlying market's close a half-day earlier and create inefficiencies that improve returns 6 to 12 times in a pure sense. While these are mitigated because of loads, restrictions on trading and fair value pricing, informational biases exist in trading such funds. These can be exploited with a simple rule: If one plans to trade at all, then one should buy (sell) the fund after its own Asian-country index falls (rises). Basing NAVs on the underlying market's close "after" the NY market closes can eliminate this inefficiency. Copyright Blackwell Publishers Ltd 2002.

Date: 2002
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Journal of Business Finance & Accounting is currently edited by P. F. Pope, A. W. Stark and M. Walker

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