Sitting bucks: Stale pricing in fixed income funds

• 成果类型: Article
• 署名作者: Choi, Jaewon; Kronlund, Mathias; Oh, Ji Yeol Jimmy
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign; Yonsei University; Tulane University; Hanyang University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.08.013
• 发表日期: 2022
• 页码: 296-317
• 关键词: Bond mutual funds; Stale prices; Fair pricing; Dilution; Fund runs

摘要

We find evidence of widespread stale pricing in bond mutual funds and the resulting risks of dilution and fragility. A principal driver of this phenomenon is the high illiquidity of funds' holdings, which makes accurate pricing difficult and provides funds with greater discretion over valuation. Consequently, net asset values (NAVs) are extremely stale and fund returns are predictable over several days and weeks, particularly during market crises. Opportunistic traders withdraw capital from overvalued funds, exacerbating the risk of fund runs, while buy-and-hold investors face annual dilution of around $1.2 billion. Our results highlight adverse consequences of insufficient fair valuation practices that remain pervasive even after corrective regulations that followed the 2003 market-timing scandal. (C) 2021 Elsevier B.V. All rights reserved.