Department of Finance
Mays Business School
360 Wehner Building (4218)
Texas A&M University
College Station, TX 77843-4218
Institutional Affiliation: Texas A&M University
NBER Working Papers and Publications
|April 2018||Sophisticated Investors and Market Efficiency: Evidence from a Natural Experiment|
with , : w24552
We study how sophisticated investors, when faced with changes in information environment, adjust their information acquisition and trading behavior, and how these changes in turn affect market efficiency. We find that, after exogenous reductions of analyst coverage due to closures of brokerage firms, hedge funds scale up information acquisition. They trade more aggressively and earn higher abnormal returns on the affected stocks. Moreover, the participation of hedge fund significantly mitigates the impairment of market efficiency caused by coverage reductions. Our results show a substitution effect between sophisticated investors and public information providers in facilitating market efficiency in a causal framework.
Published: Yong Chen & Bryan Kelly & Wei Wu, 2020. "Sophisticated Investors and Market Efficiency: Evidence from a Natural Experiment," Journal of Financial Economics, .
|September 2009||Measuring the Timing Ability and Performance of Bond Mutual Funds|
with , : w15318
This paper evaluates the ability of bond funds to "market time" nine common factors related to bond markets. Timing ability generates nonlinearity in fund returns as a function of common factors, but there are several non-timing-related sources of nonlinearity. Controlling for the non-timing-related nonlinearity is important. Funds' returns are more concave than benchmark returns, and this would appear as poor timing ability in naive models. With controls, the timing coefficients appear neutral to weakly positive. Adjusting for nonlinearity the performance of many bond funds is significantly negative on an after-cost basis, but significantly positive on a before-cost basis.
Published: "Measuring the Timing Ability and Performance of Bond Mutual Funds," with Yong Chen and Helen Peters, 2010, Journal of Financial Economics 98(1), 72-89.