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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2023
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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 |
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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 |
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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. |
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HUANG, Sheng RINGGENBERG, Matthew C. ZHANG, Zhe |
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HUANG, Sheng RINGGENBERG, Matthew C. ZHANG, Zhe |
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HUANG, Sheng |
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The information in asset fire sales |
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The information in asset fire sales |
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The information in asset fire sales |
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The information in asset fire sales |
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The information in asset fire sales |
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information in asset fire sales |
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Institutional Knowledge at Singapore Management University |
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2023 |
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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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