Predictable pricing errors and fair value pricing of US‐based international mutual funds
Journal of Financial Regulation and Compliance
ISSN: 1358-1988
Article publication date: 1 June 2004
Abstract
Fair value pricing is a critical issue for mutual funds with international market exposure because trading in the underlying foreign securities is not synchronous with US market trading. Using a sample of Japanese open‐end mutual funds that trade in the USA, this paper explores the potential for exploitation of common mutual fund pricing practices and identifies much larger pricing errors than previously reported. A simple, objective solution to the fair value pricing quandary is proposed. The solution, based on foreign exchange‐traded funds and the S&P 500, provides a timely, objective pricing alternative that is less exploitable than current mutual fund pricing practices.
Keywords
Citation
Jares, T.E. and Lavin, A.M. (2004), "Predictable pricing errors and fair value pricing of US‐based international mutual funds", Journal of Financial Regulation and Compliance, Vol. 12 No. 2, pp. 132-150. https://doi.org/10.1108/13581980410810759
Publisher
:Emerald Group Publishing Limited
Copyright © 2004, Emerald Group Publishing Limited