The information in asset fire sales

Asset prices remain depressed for years following mutual fund fire sales, but little is known about the causes of these price drops. We show that asymmetric information generates price pressure during fire sales. We separate trades into expected trades, which assume fund managers scale down their po...

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Main Authors: HUANG, Sheng, RINGGENBERG, Matthew C., ZHANG, Zhe
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2023
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/7262
https://ink.library.smu.edu.sg/context/lkcsb_research/article/8261/viewcontent/SSRN_id2735172.pdf
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spelling sg-smu-ink.lkcsb_research-82612023-10-31T01:07:04Z The information in asset fire sales HUANG, Sheng RINGGENBERG, Matthew C. ZHANG, Zhe Asset prices remain depressed for years following mutual fund fire sales, but little is known about the causes of these price drops. We show that asymmetric information generates price pressure during fire sales. We separate trades into expected trades, which assume fund managers scale down their portfolio, and discretionary trades. We find that discretionary trades contain fundamental information, whereas expected trades do not. Moreover, other traders cannot distinguish between discretionary and expected trades. Our findings help explain the magnitude and persistence of fire sale discounts: fund managers choose which assets to sell, and information asymmetries make it difficult for arbitrageurs to disentangle price pressure from fundamental information. 2023-09-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/7262 info:doi/10.1287/mnsc.2022.4585 https://ink.library.smu.edu.sg/context/lkcsb_research/article/8261/viewcontent/SSRN_id2735172.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University asymmetric information fire sales price pressure slow-moving capital Corporate Finance Finance and Financial Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic asymmetric information
fire sales
price pressure
slow-moving capital
Corporate Finance
Finance and Financial Management
spellingShingle asymmetric information
fire sales
price pressure
slow-moving capital
Corporate Finance
Finance and Financial Management
HUANG, Sheng
RINGGENBERG, Matthew C.
ZHANG, Zhe
The information in asset fire sales
description Asset prices remain depressed for years following mutual fund fire sales, but little is known about the causes of these price drops. We show that asymmetric information generates price pressure during fire sales. We separate trades into expected trades, which assume fund managers scale down their portfolio, and discretionary trades. We find that discretionary trades contain fundamental information, whereas expected trades do not. Moreover, other traders cannot distinguish between discretionary and expected trades. Our findings help explain the magnitude and persistence of fire sale discounts: fund managers choose which assets to sell, and information asymmetries make it difficult for arbitrageurs to disentangle price pressure from fundamental information.
format text
author HUANG, Sheng
RINGGENBERG, Matthew C.
ZHANG, Zhe
author_facet HUANG, Sheng
RINGGENBERG, Matthew C.
ZHANG, Zhe
author_sort HUANG, Sheng
title The information in asset fire sales
title_short The information in asset fire sales
title_full The information in asset fire sales
title_fullStr The information in asset fire sales
title_full_unstemmed The information in asset fire sales
title_sort information in asset fire sales
publisher Institutional Knowledge at Singapore Management University
publishDate 2023
url https://ink.library.smu.edu.sg/lkcsb_research/7262
https://ink.library.smu.edu.sg/context/lkcsb_research/article/8261/viewcontent/SSRN_id2735172.pdf
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