... Robert A. Schwartz Baruch College, City University of New York Jaime Aguilar Bolsa de Madrid ... more ... Robert A. Schwartz Baruch College, City University of New York Jaime Aguilar Bolsa de Madrid Luisella Bosetti Borsa Italiana Luca ... Nick Dutton London Stock Exchange plc Hugh Brown London Stock Exchange plc Adam Kinsley London Stock Exchange plc Niki Beattie Merrill ...
... Robert A. Schwartz Baruch College, City University of New York Jaime Aguilar Bolsa de Madrid ... more ... Robert A. Schwartz Baruch College, City University of New York Jaime Aguilar Bolsa de Madrid Luisella Bosetti Borsa Italiana Luca ... Nick Dutton London Stock Exchange plc Hugh Brown London Stock Exchange plc Adam Kinsley London Stock Exchange plc Niki Beattie Merrill ...
This study is largely motivated by the ongoing process to revise the Investment Services Directiv... more This study is largely motivated by the ongoing process to revise the Investment Services Directive (ISD). Perhaps the most important aspect of this process are the consequences of the repeal of Article 14(3) which allows national authorities to stipulate that retail investor orders be executed only on a regulated market (the so-called concentration rule). In the absence of a concentration rule, trades may be executed away from the main market centre. Fragmentation occurs as orders are executed through preferencing arrangements and through in-house matching. This paper focuses on a specific type of preferencing - the internalisation of order flow. This paper examines the extent to which order flow is internalised in European financial markets. In doing so, it formally defines internalisation and explores its relationship with issues such as market fragmentation and price discovery. It illustrates how internalisation practices differ across each of the major European financial centres...
Canadian Journal of Economics/Revue canadienne d'économique, 2009
Abstract. We develop a model of mutual fund manager investment decisions near the end of quarters... more Abstract. We develop a model of mutual fund manager investment decisions near the end of quarters. We show that when investors reward better performing funds with higher cash flows, near quarter-ends a mutual fund manager has an incentive to distort new investment toward stocks in which his fund holds a large existing position. The short-term price impact of these trades increase the fund's reported returns. Higher returns are rewarded by greater subsequent fund inflows which, in turn, allow for more investment distortion the next quarter. Because the price impact of trades is short term, each subsequent quarter begins with a larger return deficit. Eventually, the deficit cannot be overcome. Thus, our model leads to the empirically observed short-run persistence and long-run reversal in fund performance. In doing so, our model provides a consistent explanation of many other seemingly contradictory empirical features of mutual fund performance.
... Robert A. Schwartz Baruch College, City University of New York Jaime Aguilar Bolsa de Madrid ... more ... Robert A. Schwartz Baruch College, City University of New York Jaime Aguilar Bolsa de Madrid Luisella Bosetti Borsa Italiana Luca ... Nick Dutton London Stock Exchange plc Hugh Brown London Stock Exchange plc Adam Kinsley London Stock Exchange plc Niki Beattie Merrill ...
... Robert A. Schwartz Baruch College, City University of New York Jaime Aguilar Bolsa de Madrid ... more ... Robert A. Schwartz Baruch College, City University of New York Jaime Aguilar Bolsa de Madrid Luisella Bosetti Borsa Italiana Luca ... Nick Dutton London Stock Exchange plc Hugh Brown London Stock Exchange plc Adam Kinsley London Stock Exchange plc Niki Beattie Merrill ...
This study is largely motivated by the ongoing process to revise the Investment Services Directiv... more This study is largely motivated by the ongoing process to revise the Investment Services Directive (ISD). Perhaps the most important aspect of this process are the consequences of the repeal of Article 14(3) which allows national authorities to stipulate that retail investor orders be executed only on a regulated market (the so-called concentration rule). In the absence of a concentration rule, trades may be executed away from the main market centre. Fragmentation occurs as orders are executed through preferencing arrangements and through in-house matching. This paper focuses on a specific type of preferencing - the internalisation of order flow. This paper examines the extent to which order flow is internalised in European financial markets. In doing so, it formally defines internalisation and explores its relationship with issues such as market fragmentation and price discovery. It illustrates how internalisation practices differ across each of the major European financial centres...
Canadian Journal of Economics/Revue canadienne d'économique, 2009
Abstract. We develop a model of mutual fund manager investment decisions near the end of quarters... more Abstract. We develop a model of mutual fund manager investment decisions near the end of quarters. We show that when investors reward better performing funds with higher cash flows, near quarter-ends a mutual fund manager has an incentive to distort new investment toward stocks in which his fund holds a large existing position. The short-term price impact of these trades increase the fund's reported returns. Higher returns are rewarded by greater subsequent fund inflows which, in turn, allow for more investment distortion the next quarter. Because the price impact of trades is short term, each subsequent quarter begins with a larger return deficit. Eventually, the deficit cannot be overcome. Thus, our model leads to the empirically observed short-run persistence and long-run reversal in fund performance. In doing so, our model provides a consistent explanation of many other seemingly contradictory empirical features of mutual fund performance.
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