Stale pricing in corporate bond funds: Evidence from Europe
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School of Business |
Bachelor's thesis
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Authors
Date
2021
Department
Major/Subject
Mcode
Degree programme
Rahoitus
Language
en
Pages
24+3
Series
Abstract
I investigate the issue of stale pricing in European corporate bond funds. For the period of 2011-2020, I present evidence for significantly stale net asset values, and persistence in staleness for these funds. This staleness is more profound when a fund holds illiquid asset of lower credit quality, which are harder to value fairly due to thin availability of fair prices. When a fund faces adverse shocks, such as negative past performance and times of increased market volatility, the staleness in net asset values further amplifies. Possible explanations for this effect are the increased illiquidity of underlying assets, but as well fund management discretion to report smoother returns. The degree to which each of these drives the staleness is a harder task to determine. Stale pricing in funds nevertheless presents an arbitrage opportunity, at the expense of long-term investors.Description
Thesis advisor
Shin, SeanKeywords
stale price, net asset value, corporate bond fund, illiquid asset