Milan Szabo
This study explores the effect of security returns on subsequent sales and purchases of securities by investment funds, and examines the potential of fund-related characteristics to amplify the elevated and procyclical sales of under-performing securities by funds. The study finds significant variations in investment behavior across different asset classes using unique data on trades by retail funds and non-retail hedge funds. The study then demonstrates how the financial fragility of funds increases their sensitivity to decreasing security returns, leading to increased sales of under-performing securities by funds.
JEL codes: G11, G23
Keywords: Asset management, emerging markets, externalities, interconnectedness, investment behavior
Issued: May 2023
Download: CNB WP No. 5/2023 (pdf, 576 kB)