Front-running by Mutual Fund Managers: A Mixed Bag

Détails

ID Serval
serval:BIB_1765979F9FCD
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Institution
Titre
Front-running by Mutual Fund Managers: A Mixed Bag
Périodique
European Finance Review
Auteur⸱e⸱s
Danthine J.-P., Moresi S.
Statut éditorial
Publié
Date de publication
1998
Peer-reviewed
Oui
Volume
2
Numéro
1
Pages
29-56
Langue
anglais
Résumé
This paper evaluates the welfare implications of front-running by mutual fund managers. It extends the model of Kyle (1985) to a situation in which the insider with fundamentals-information competes against an insider with trade-information and in which noise trading is endogenized. Noise traders are small investors trading through mutual funds to hedge non-tradable or illiquid assets. The insider with trade-information is one of the fund managers. We find that her front-running activity reduces the liquidity costs of her customers, but it also reduces their hedging benefits. As a result, the customers of the front-running manager may be worse off and place smaller orders. The opposite is true, however, for those investors who are not subject to front-running. In aggregate, front-running has either no or positive consequences for welfare.
Mots-clé
Front-running, Insider trading, Noise trading
Création de la notice
19/11/2007 10:39
Dernière modification de la notice
20/08/2019 13:47
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