Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2018

Does Financial Globalization Propagate Managerial Skills? Lessons from the Mutual Fund Industry

Hong ZHANG, Massimo MASSA, Si CHENG
We examine whether globalization may unintendedly allow financial institutions with low managerial skills to grow. Using a complete sample of global mutual funds, we find that low-skilled fund companies may strategically differentiate their products by launching new funds that track less-explored fo...
Keywords: Globalization, Cross-border capital flows, Mutual Funds, Skills, market efficiency
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Annual Conference

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Investment Finance

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May 2018

Trading by Crossing

Yue-Cheong CHAN, Jennifer CONRAD, Gang HU, Sunil WAHAL
We study actual trading transactions that are darker than all “dark pools,” as they are truly invisible to the marketplace both pre- and post-trade. Using a proprietary dataset of institutional trades, we analyze internal crosses – transactions which allow institutions to match purchases and s...
Keywords: Institutional trading, Cross Trading, Inter-Fund Trade, Asset Management, Economies of Scale, Trading Cost, Best Execution
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Annual Conference

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Investment Finance

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May 2018

Global Market Inefficiencies

Söhnke M. BARTRAM, Mark GRINBLATT
Using point-in-time accounting data, we estimate monthly fair values of 25,000+ stocks from 36 countries. A trading strategy based on deviations from fair value earns significant risk-adjusted returns (“alpha”) in most regions, especially Asia-Pacific, that are unrelated to known anomalies. The ...
Keywords: International finance, valuation, Asset Pricing, market efficiency, Fundamental analysis, Point-in-time, Transaction costs, Principal components, Instrumented principal components analysis
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Annual Conference

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Investment Finance

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May 2018

Liquidity Provision Contracts and Market Quality: Evidence from the New York Stock Exchange

Hendrik BESSEMBINDER, Jia HAO, Kuncheng (K.C.) ZHENG
We exploit a discontinuity in the New York Stock Exchange Designated Market Maker (DMM) contract to identify causal effects of DMM participation on equilibrium market outcomes. We document that contractual features that enhance DMM participation are associated with increased depth, narrower bid-ask ...
Keywords: Liquidity provision, designated market maker, NYSE
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Annual Conference

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Investment Finance

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May 2018

The Promises and Pitfalls of Robo-advising

Nagpurnanand PRABHALA, Francesco DACUNTO, Alberto G. ROSSI
We study a robo-advising portfolio optimizer that constructs tailored strategies based on investors' holdings and preferences. Adopters are similar to non-adopters in terms of demographics, but have more assets under management, trade more, and have higher risk-adjusted performance. The robo-advisin...
Keywords: FinTech, portfolio choice, Behavioral finance, Individual Investors, Financial Literacy, Technology Adoption
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