Stock repurchasing bias of mutual funds

Mengqiao Du, Alexandra Niessen-Ruenzi and Terrance Odean

Review of Finance, 2024, vol. 28, issue 2, 699-728

Abstract: This article shows that mutual funds’ trading experiences bias their future repurchasing decisions. Mutual funds are less likely to repurchase a stock if they previously sold the stock for a loss rather than for a gain. After switching to managing a different fund, fund managers still avoid repurchasing stocks they sold for a loss at a past fund. We do not find that mutual fund managers are biased against repurchasing past loser stocks because of superior information. Though less likely to be repurchased, repurchased losers do not underperform repurchased winners—and the fund itself—in the subsequent quarter.

Keywords: stock repurchasing; mutual funds; fund performance; behavioral bias (search for similar items in EconPapers)
JEL-codes: G11 G23 G41 (search for similar items in EconPapers)
Date: 2024
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