Topic: Trading by Crossing
Speaker: Gang Hu, Associate Professor of Finance, School of Accounting and Finance, Hong Kong
Polytechnic University
Date: September 10th (Thursday)
Time: 12:30pm-1:30pm
Location: Building
1, Room 301
Language: English
Abstract:
Using
a unique proprietary dataset of institutional trades, we show that it is a
common practice for mutual fund families to buy and sell the same stock for
different accounts on the same day. While many of these trades are executed
through the external market, there is also a considerable amount executed by
crossing internally within the mutual fund family. Internally crossed trades
incur lower implicit costs and explicit costs of trading, and we estimate that
the total trading cost savings enjoyed by our sample mutual fund families
amount to $1.28 billion during our 12-year period between 1999 and 2010. If
mutual fund families are able to exploit profitable opportunities by executing
those potentially crossable market trades through an internal crossing mechanism,
there can be a further saving of trading costs of $5.65 billion. Since mutual
fund families with larger trading value and number of trades are more likely to
trade by internal crossing, our findings provide a new explanation for the
sources of economies-of-scale in asset management.
About the speaker:
Gang
Hu is an Associate Professor of Finance at The Hong Kong Polytechnic University
(PolyU). Dr. Hu earned his Ph. D in
Finance from Boston College in 2005 and he specializes in the study of
corporate finance, institutional investors, trading, and entrepreneurial
finance & innovation. His research
has been presented at such leading academic conferences as American Finance
Association (AFA) and Western Finance Association (WFA). He has published his
research widely in leading academic journals, practitioner journals, and books,
including Review of Financial Studies,
Journal of Financial Economics, Journal of Financial, and Quantitative Analysis. Before joining
the PolyU, Hu taught at Babson College.
