Abstract
Using a unique dataset we provide new evidence on the significant penalty on client fund performance due to conflicts of interest related to the cross trading (TCT) activities of mutual fund advisers: funds managed by advisers in the top TCT quintile significantly underperform funds managed by advisers in the bottom TCT quintile by 1% per year. Adviser incentives to engage in cross trading are directly related to their opportunities for generating revenues from affiliated trading operations. Additional tests suggest that the significantly higher trading commissions paid by client funds of high-TCT advisers are a major source of their under-performance.
| Original language | English |
|---|---|
| Pages (from-to) | 99-130 |
| Number of pages | 32 |
| Journal | Journal of Financial Intermediation |
| Volume | 25 |
| DOIs | |
| Publication status | Published - 1 Jan 2016 |
| Externally published | Yes |
Keywords
- Mutual fund performance
- Cross trading
- Investment advisers
- Brokerage commissions
- Adviser governance
Fingerprint
Dive into the research topics of 'Cross trading by investment advisers: Implications for mutual fund performance'. Together they form a unique fingerprint.Prizes
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London School of Economics - Paul Woolley Centre Honorarium Award
Casavecchia, Lorenzo (Recipient), 2009
Prize: Honorary award