Authors:

• Zhi Da, University of Notre Dame
• Clemens Sialm, University of Texas, Austin
• Borja Larraín, Catholic University of Chile
• José Tessada, Pontificia Universidad Católica de Chi

Overview:

This study concludes that transfers between Multifunds in Chile destabilize the market and bring pressure to bear on prices. The study examines the Chilean evidence of the effects entailed in following the recommendations of certain companies to switch Multifunds, as in the case of Felices y Forrados. It states that the recommendations that follow short-term trends produce large, coordinated flows of funds that put pressure on prices and increase volatility in financial markets, causing a drop in efficiency.

To review the study in detail, please download it here.