Ran Xing joined the Finance section as an assistant professor in 2021. The article, entitled “A Horizon-Based Decomposition of Mutual Fund Value Added using Transactions”, is part of his more general research agenda about the performance of mutual funds and the trading skills of institutional investors.

Ran Xing, Assistant professor at the Finance section.

Ran and his coauthors (Jules van Binsbergen at the Wharton School at University of Pennsylvania, Jungsuk Han at Seoul National University, and Hongxun Ruan at Peking University) provide evidence that funds specialize in identifying investment opportunities at different investment horizons. High-turnover funds profit substantially from their new holdings in the first two weeks, with more than 80% of the profits earned on earnings announcement days and Federal Open Market Committee (FOMC) meeting days. Low-turnover funds profit mainly from their holdings longer than a year.

Because funds cannot spread their trades over time for short-term investment ideas, short-term ideas are more costly to trade and less scalable. To compensate for that, high-turnover funds usually invest in a large number of short-term investment opportunities at the same time.