They will use this model to estimate the potential profit funds may expect to make by lending their shares. The results will also directly characterize the inherent costs that security borrowers face. Finally, the data and methods utilized in the study will permit exploration of the link between short-selling activity and borrowing costs. They will document the magnitude of order flow commonalities induced by institutional trading, as well as the growth in such commonalities over the past 15 years. They will also document the effects of these commonalities on prices and trading costs.
Most mutual funds belong to fund families.
The authors propose to investigate the impact of family structure on fund strategy to attract investor funds and, in turn, the effect of such strategies on the size and nature of the fund family. Preliminary results indicate that there is a strong positive spillover effect of a star performer, resulting in higher cash inflow for other funds in the family as well. A family can raise the probability of obtaining a star performer by increasing family size and making the fund returns more negatively correlated. Factors that increase the odds of producing a star are also ones associated with a lower average performance. Investors thus treat buying and selling asymmetrically.