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Swing Pricing and Fragility in Open-end Mutual Funds

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

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Swing Pricing and Fragility in Open-end Mutual Funds

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

How to prevent runs on 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 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 redemptions during stress periods. The positive impact of alternative pricing rules on fund flows reverses in calm periods when costs associated with higher tracking error dominate the pricing effect.

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Page Count

46

Publisher

International Monetary Fund

Published Date

ISBN 10

1513519492

ISBN 13

9781513519494

Swing Pricing and Fragility in Open-end Mutual Funds

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

Write a review Read reviews Take a Quiz Solve Book Puzzle

Swing Pricing and Fragility in Open-end Mutual Funds

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

How to prevent runs on 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 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 redemptions during stress periods. The positive impact of alternative pricing rules on fund flows reverses in calm periods when costs associated with higher tracking error dominate the pricing effect.

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Solve jigsaw puzzle

Age

Page Count

46

Publisher

International Monetary Fund

Published Date

ISBN 10

151351833X

ISBN 13

9781513518336

Book's by Marcin Kacperczyk

Swing Pricing and Fragility in Open-end Mutual Funds

Swing Pricing and Fragility in Open-end Mutual Funds

Swing Pricing and Fragility in Open-end Mutual Funds

Swing Pricing and Fragility in Open-end Mutual Funds

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