Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267739 
Year of Publication: 
2022
Series/Report no.: 
CFR Working Paper No. 22-11
Publisher: 
University of Cologne, Centre for Financial Research (CFR), Cologne
Abstract: 
Using a novel return-based method to detect allocations of corporate bond offerings, which are underpriced on average, we find that mutual funds most active in the primary market generate significant alpha and outperform those that are less active. Our evidence suggests that underwriters direct underpriced allocations repeatedly to fund families with which they have stronger underwriting relationships. Consistent with the concave performance-flow relationship that describes bond fund investors' behavior, families maximize profitability by strategically distributing allocations to member funds that underperformed their style benchmark over the last year at the expense of those that outperformed.
Document Type: 
Working Paper

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