Published in:Western Finance Association Annual Meeting Paper, 2017
Extent:
1 Online-Ressource (54 p)
Language:
English
DOI:
10.2139/ssrn.2735172
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 30, 2019 erstellt
Description:
Asset prices remain depressed for several years following mutual fund fire sales. We show that price pressure from fire sales is partly due to asymmetric information which leads to an adverse selection problem for arbitrageurs. After a flow shock, fund managers do not scale down their portfolio, rather, they choose to sell a subset of low-quality stocks that subsequently underperform. In other words, fund managers have selling skill. Our findings suggest an explanation for the tendency of asset prices to remain depressed following fire sales: information asymmetries make it difficult for arbitrageurs to disentangle pure price pressure from negative information