Mutual Fund Trading Pressure: Firm-Level Stock Price Impact and Timing of SEOs
Name
Kogan_Mutual fund.pdf
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433.45 KB
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Adobe PDF
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80432277ee2b80abc0bac27cebbf5a90
Author(s)
Khan, Mozaffar Nayim
Kogan, Leonid
Serafeim, George
Date Issued
July 2012
Journal
Journal of Finance
Publisher
American Finance Association
Citation
Khan, Mozaffar, Leonid Kogan, and George Serafeim. “Mutual Fund Trading Pressure: Firm-Level Stock Price Impact and Timing of SEOs.” The Journal of Finance 67.4 (2012): 1371–1395.
Version
Author's final manuscript
Abstract
We use price pressure resulting from purchases by mutual funds with large capital inflows to identify overvalued equity. This is a relatively exogenous overvaluation indicator as it is associated with who is buying—buyers with excess liquidity—rather than what is being purchased. We document substantial stock price impact associated with purchases by high-inflow mutual funds, and find the probability of a seasoned equity offering (SEO), insider sales, and the probability of a stock-based acquisition increase significantly in the four quarters following the mutual fund buying pressure. These results provide new evidence that firm managers are able to identify and exploit overvalued equity.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike 3.0
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DOI of Published Version
https://doi.org/10.1111/j.1540-6261.2012.01750.x
