In sharp contrast to prior findings on the trading performance of individual investors, we find a strong positive relation between trade frequency and performance among a large sample of institutional investors. The positive performance of institutional traders that trade actively persists for at least a year, as they continue to trade actively and generate abnormal returns from their trades. Large funds, however, are unable to overcome the transaction costs associated with their larger trades, a finding that lends insight into the decreasing returns to scale that characterizes the money management industry. Active traders generate performance both by supplying liquidity and by trading aggressively on information.
Trade Frequency, Fund Performance
Finance | Finance and Financial Management
BUSSE, Jeffrey; TONG, Lin; TONG, Qing; and ZHANG, Zhe.
Trading frequency and fund performance. (2016). 1-43. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/5339
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