Review of Financial Studies Vol. 32 No. 1 2019

Trading Regularity and Fund Performance

Jeffrey A. Busse¹; Lin Tong²; Qing Tong³; Zhe Zhang⁴

¹ Goizueta Business School, Emory University · ² Gabelli School of Business, Fordham University , · ³ School of Business, Renmin University of China · ⁴ Lee Kong Chian School of Business, Singapore Management University ,

Abstract

We construct a new measure of trading regularity, capturing the extent to which investors trade on a regular basis. Institutional investors that regularly trade outperform those that trade less regularly. The performance of funds that regularly trade persists for at least a year. Among those who trade most regularly, larger funds perform relatively worse, because they incur higher transaction costs associated with their larger trades. Institutions that regularly trade generate superior performance, in part, by behaving as contrarians and by trading more aggressively on information. By contrast, we find no relation between trading regularity and performance among index funds. Received November 21, 2016; editorial decision March 28, 2018 by Editor Andrew Karolyi.

DOI

10.1093/rfs/hhy059

Volume

32

Issue

1

Pages

374-422

Language

en

Sources

bibtex:phds-export.bib openalex crossref

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