Late Trading in Mutual Fund Shares – The Sequel?

This paper provides new evidence of late trading activities in the mutual fund markets of France, Germany and the UK. We find that investors who are allowed to trade late can earn substantial returns between 18% and 35% annually. Late trading accounts for up to 0.6% of daily flow. Evidence of such illicit and abusive trading practices was uncovered in 2003 during a large scandal in the US fund industry. Our findings suggest that late trading may still persist in European markets. However, we do not find evidence of late trading in the UK.