Price Effects Caused by Fire Sales (and Purchases)<br/>

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Price Effects Caused by Fire Sales (and Purchases)

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 52202 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Barakchian, Mahdi; Ebrahimnejad, Ali
Abstract:
This paper examines the effects of institutional price pressure caused by severe inflows and outflows of capital by studying mutual funds transactions in the Iranian stock market between 2010 and 2017. According to the findings, mutual funds that experience severe outflows tend to reduce or eliminate existing positions in their portfolios, which creates a severe price pressure in the securities held by distressed funds. This price pressure caused by a severe outflow of capital leads to decrease stock prices below their intrinsic value. So investors who buy shares that sold by mutual funds earn abnormal returns for providing liquidity. On the other hand, funds with severe capital inflows tend to increase positions in their portfolios, which creates a positive price pressure. However, the results of the regressions of the CAPM, the Fama-French three-factor and the Calhart four-factor models indicate that the abnormal returns obtained are not significant despite the large coefficient (alpha)
Keywords:
Fire Sale ; Transaction ; Price Pressure ; Capital Flows ; Liquidity ; Iranian Mutual Funds

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