@article{0c2f09f19a234cf99d5d0862fa38cd4a,
title = "Effective fair pricing of international mutual funds",
abstract = "We propose a new methodology to provide fair prices of international mutual funds by adjusting prices at the individual security level using a comprehensive and economically relevant information set. Stepwise regressions are used to endogenously determine the stock-specific optimal set of factors. Using 16 synthetic funds whose characteristics are extracted from 16 corresponding actual US-based Japanese mutual funds, we demonstrate that our method estimates fund prices significantly more accurately than existing methods. Although existing fair-pricing methods provide an improvement over the current practice of simply using Japanese market closing prices, they are still highly vulnerable to exploitation by market-timers. By contrast, our method is the most successful in preventing such strategic exploitation since no competing method can profit from our stated prices.",
keywords = "Fair pricing, International mutual funds, Stale pricing, Stepwise regression",
author = "Chua, {Choong Tze} and Sandy Lai and Yangru Wu",
note = "Funding Information: The authors would like to thank an anonymous referee and the Managing Editor of the Journal of Banking and Finance for many helpful comments and suggestions. This paper was reviewed and accepted while Professor Giorgio Szego was the Managing Editor of the journal and by the past Editorial Board. In addition, the authors would like to thank Andrew Abel, Yacine Ait-Sahalia, Ann-Marie Anderson, Marshall Blume, Ivan Brick, Charles Cao, Kalok Chan, N.K. Chidambaran, Bhagwan Chowdhry, Cheol Eun, Bruce Grundy, Allaudeen Hameed, Simi Kedia, Richard Kish, Ming Liu, Craig McKinlay, David Musto, David Myers, Nandkumar Nayar, Darius Palia, Dilip Patro, Christo Pirinsky, Krishna Ramaswamy, Heibatollah Sami, Ben Sopranzetti, Avanidhar Subrahmanyam, Marti Subrahmanyam, Geraldo Vasconcellos, Wenlong Weng, Yihong Xia, Hua Zhang, Feng Zhao, the anonymous referee and seminar participants at the Wharton School, the Chinese University of Hong Kong, Lehigh University, the National University of Singapore, Rutgers University, the University of Utah as well as summer camp participants at Singapore Management University. Choong Tze Chua and Sandy Lai are grateful to the Office for Research of Singapore Management University for financial support. Yangru Wu would like to thank the Rutgers Business School and the Whitcomb Center for financial support. Part of this research was conducted while Yangru Wu visited the Chinese Academy of Finance and Development of the Central University of Finance and Economics. We are solely responsible for any remaining errors. ",
year = "2008",
month = nov,
doi = "10.1016/j.jbankfin.2007.06.014",
language = "English (US)",
volume = "32",
pages = "2307--2324",
journal = "Journal of Banking and Finance",
issn = "0378-4266",
publisher = "Elsevier",
number = "11",
}