Swing Pricing and Fragility in Open-End Mutual Funds

Dunhong Jin, Marcin Kacperczyk, Bige Kahraman and Felix Suntheim

The Review of Financial Studies, 2022, vol. 35, issue 1, 1-50

Abstract: How can fragility be averted in open-end mutual funds? In recent years, markets have observed an innovation that changed the way open-end funds are priced. Alternative pricing rules (known as swing pricing) adjust funds’ net asset values to pass on funds’ trading costs to transacting shareholders. Using unique data on investor-level transactions in U.K. corporate bond funds, we show that swing pricing eliminates the first-mover advantage arising from the traditional pricing rule and significantly reduces outflows during market stress. Swing pricing also reduces concavity in the flow-performance relationship and dilution in fund performance.

JEL-codes: G01 G2 G23 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (24)

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Related works:
Working Paper: Swing Pricing and Fragility in Open-end Mutual Funds (2019)
Working Paper: Swing Pricing and Fragility in Open-end Mutual Funds (2019)
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