What determines mutual fund trading in foreign stocks?

Kalok Chan and Vicentiu Covrig

Journal of International Money and Finance, 2012, vol. 31, issue 4, 793-817

Abstract: We examine the portfolio rebalancing, measured by the equity churn rate, of mutual funds from 29 countries based on annual stockholdings over the 1999–2006 period. We find that funds more often trade the stocks of companies located in countries with higher degree of information asymmetry and are less familiar to fund managers, after we control for the effects of stock market development and investor protection. Consistent with the behavioral bias, fund managers more often rebalance stocks in foreign markets that perform well. This bias is exacerbated when fund managers are less familiar with and less informed about those markets.

Keywords: Churn rate; Turnover; Mutual funds; Trading; Information disclosure; Familiarity (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:31:y:2012:i:4:p:793-817

DOI: 10.1016/j.jimonfin.2012.01.003

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