We examine whether informed trading around earnings announcements drives mutual fund performance. The measure is motivated by prior studies arguing that a mutual fund is skilled if it buys stocks with subsequent high earnings announcement returns. We find that this measure predicts future mutual fund returns. On average, after adjusting for Carhart’s four risk factors, the top decile of mutual funds outperforms the bottom decile by 44 basis points per quarter. By decomposing fund alphas into two components in their relations to earnings, we find that this measure is only associated with earnings-related fund alphas. This measure can also be used to predict stock returns at future earnings announcements.

In this study, we analyze a sample of 3982 international bond issues from 31 countries to examine the impact of geographic proximity on the selection of lead underwriter in the international bond market. We find that proximate banks are more likely to lead underwrite risky bonds and non-rated bonds. On average, the total issue cost is lower if the lead underwriter is a proximate bank. The overall results suggest that geographically proximate banks have better access to private information about issuing companies. We also find that the cost reduction effect of proximate underwriting only appears in developed markets. In addition, this cost reduction effect is relatively weak in countries with a legal system that provides good investor protection.

The switch in primary exchange listing of members of the Jardine Group from Hong Kong to Singapore provides a unique setting in which to examine changes in exchange listings. Previous studies of listing switches from Nasdaq to AMEX/NYSE find increases in liquidity and positive abnormal returns. Clyde et al. (Journal of Finance 52 (1997) 2103) report decreased liquidity and positive abnormal returns associated with switches from AMEX to Nasdaq. In contrast, we find decreased liquidity as measured by trading volume accompanied by negative abnormal returns––demonstrating that expected liquidity increases are not the sole reason for exchange switches and that management may perceive benefits from a switch in listing even if investors do not. Moreover, evidence is accumulating that the increased liquidity observed by previous researches is only associated with switches from smaller to larger markets. In spite of the fact that trading volume declines after the switch, there are still a sufficient number of Hong Kong investors trading in Singapore to cause a statistically significant decline in trading volume in Singapore when there is a holiday in Hong Kong. Hence, order flow is segmented, but not completely. We find that individual firm trading volume is most closely associated with the market on which it is traded most.