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What determines mutual fund trading in foreign stocks?

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  • Chan, Kalok
  • Covrig, Vicentiu
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    Abstract

    We examine the portfolio rebalancing, measured by the equity churn rate, of mutual funds from 29 countries based on annual stockholdings over the 1999–2006 period. We find that funds more often trade the stocks of companies located in countries with higher degree of information asymmetry and are less familiar to fund managers, after we control for the effects of stock market development and investor protection. Consistent with the behavioral bias, fund managers more often rebalance stocks in foreign markets that perform well. This bias is exacerbated when fund managers are less familiar with and less informed about those markets.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 31 (2012)
    Issue (Month): 4 ()
    Pages: 793-817

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    Handle: RePEc:eee:jimfin:v:31:y:2012:i:4:p:793-817

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    Web page: http://www.elsevier.com/locate/inca/30443

    Related research

    Keywords: Churn rate; Turnover; Mutual funds; Trading; Information disclosure; Familiarity;

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    Cited by:
    1. Beracha, Eli & Fedenia, Mark & Skiba, Hilla, 2014. "Culture's impact on institutional investors' trading frequency," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 34-47.

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