Abstract
This paper explores how mutual fund groups set the price of in-house transactions among affiliated funds. We collect a data set of four million equity transactions and compare the pricing of trades crossed internally (cross-trades) with that of twin trades executed with external counterparties. While cross-trades should reduce transaction costs for both trading parties, we find that the price of cross-trades is set strategically to reallocate performance among sibling funds. Furthermore, we provide evidence that a large number of cross-trades are backdated. We discuss the implications for the literature on fund performance and the current regulatory debate.
| Original language | English |
|---|---|
| Pages (from-to) | 359-378 |
| Number of pages | 20 |
| Journal | Journal of Financial Economics |
| Volume | 135 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - Jan 2020 |
| Externally published | Yes |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 17 Partnerships for the Goals
Keywords
- Backdating
- Cross-trades
- Monitoring
- Mutual fund families
- Transfer pricing
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