Finance Papers
Document Type
Working Paper
Date of this Version
10-6-2006
Publication Source
Wharton Finance Paper
Abstract
The observed predictability in indexes and domestic mutual funds has been attributed to stale prices. Market timing of mutual funds exploits this predictability. We show that there are few stale prices for stocks in the top few deciles of market value and that mutual funds concentrate their holding in these deciles. Still, we observe predictability in the returns of portfolios and mutual funds holding these stocks. Much of this predictability is due to stickiness, or momentum, in market returns and not stale prices. Thus, the often suggested use of “fairvalue” accounting will not eliminate the profitability of market timing.
Recommended Citation
Blume, M. E., & Keim, D. B. (2006). Stale or Sticky Stock Prices? Non-Trading, Predictability, and Mutual Fund Returns. Wharton Finance Paper, Retrieved from https://repository.upenn.edu/fnce_papers/8
Date Posted: 27 November 2017