Liquidity risk and the performance of UK mutual funds

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dc.contributor.authorForan, Jason
dc.contributor.authorO'Sullivan, Niall
dc.contributor.funderIrish Research Council
dc.contributor.funderUniversity College Cork
dc.date.accessioned2014-11-27T17:05:25Z
dc.date.available2014-11-27T17:05:25Z
dc.date.issued2014-10
dc.date.updated2014-09-11T11:12:48Z
dc.description.abstractWe examine the role of liquidity risk, both as a stock characteristic as well as systematic liquidity risk, in UK mutual fund performance for the first time. Using four alternative measures of stock liquidity we extract principal components across stocks in order to construct systematic or market liquidity factors. We find that on average UK mutual funds are tilted towards liquid stocks (except for small stock funds as might be expected) but that, counter-intuitively, liquidity as a stock characteristic is positively priced in the cross-section of fund performance. We find that systematic liquidity risk is positively priced in the cross-section of fund performance. Overall, our results reveal a strong role for stock liquidity level and systematic liquidity risk in fund performance evaluation models.en
dc.description.sponsorshipUniversity College Cork (Strategic Research Fund)en
dc.description.statusPeer revieweden
dc.description.versionAccepted Versionen
dc.format.mimetypeapplication/pdfen
dc.identifier.citationFORAN, J. & O'SULLIVAN, N. 2014. Liquidity risk and the performance of UK mutual funds. International Review of Financial Analysis, 35, 178-189. http://dx.doi.org/10.1016/j.irfa.2014.09.001en
dc.identifier.doi10.1016/j.irfa.2014.09.001
dc.identifier.endpage189en
dc.identifier.issn1057-5219
dc.identifier.journaltitleInternational Review of Financial Analysisen
dc.identifier.startpage178en
dc.identifier.urihttps://hdl.handle.net/10468/1721
dc.identifier.volume35en
dc.language.isoenen
dc.publisherElsevieren
dc.relation.urihttp://www.sciencedirect.com/science/article/pii/S1057521914001252
dc.rightsCopyright © 2014 Elsevier Inc. All rights reserved. NOTICE: this is the author’s version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Financial Analysis, [Volume 35, October 2014, Pages 178–189] DOI http://dx.doi.org/10.1016/j.irfa.2014.09.001en
dc.subjectMutual fund performanceen
dc.subjectLiquidity risken
dc.subjectLiquidity characteristicsen
dc.titleLiquidity risk and the performance of UK mutual fundsen
dc.typeArticle (peer-reviewed)en
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