Work

Swing Pricing and Fragility in Open-End Mutual Funds

Year: 2021

Type: article

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.

Source: Review of Financial Studies

DOI: 10.1093/rfs/hhab022

Authors: Dunhong Jin, Marcin Kacperczyk, Bige Kahraman, Felix Suntheim

Institutions: University of Hong Kong, Centre for Economic Policy Research, Imperial College London, University of Oxford, International Monetary Fund

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,460

OpenAlex ID: W3136426699