IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v69y2023i9p5066-5086.html
   My bibliography  Save this article

The Information in Asset Fire Sales

Author

Listed:
  • Sheng Huang

    (China Europe International Business School (CEIBS), Pudong, Shanghai 201206, China)

  • Matthew C. Ringgenberg

    (David Eccles School of Business, University of Utah, Salt Lake City, Utah 84112)

  • Zhe Zhang

    (Lee Kong Chian School of Business, Singapore Management University, Singapore 178899, Singapore)

Abstract

Asset prices remain depressed for years following mutual fund fire sales, but little is known about the causes of these price drops. We show that asymmetric information generates price pressure during fire sales. We separate trades into expected trades, which assume fund managers scale down their portfolio, and discretionary trades. We find that discretionary trades contain fundamental information, whereas expected trades do not. Moreover, other traders cannot distinguish between discretionary and expected trades. Our findings help explain the magnitude and persistence of fire sale discounts: fund managers choose which assets to sell, and information asymmetries make it difficult for arbitrageurs to disentangle price pressure from fundamental information.

Suggested Citation

  • Sheng Huang & Matthew C. Ringgenberg & Zhe Zhang, 2023. "The Information in Asset Fire Sales," Management Science, INFORMS, vol. 69(9), pages 5066-5086, September.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:9:p:5066-5086
    DOI: 10.1287/mnsc.2022.4585
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2022.4585
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.2022.4585?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:69:y:2023:i:9:p:5066-5086. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.