September 4, 2003 (Atlanta) - The allegations of financial-market abuses by New York Attorney General Eliot Spitzer is "unlikely to be an isolated incident" and could have severe repercussions on investor confidence according to Dr. Jason Greene, finance professor at the Robinson College of Business and an expert on the mutual fund industry.
"The most troubling issue is that the mutual fund companies appear to have been active participants in allowing large hedge funds to profit at the expense of individuals," said Greene.
Greene's recently published study, The Dilution Impact of Daily Fund Flows on Open-End Mutual Funds (with Charles Hodges), found that small investors have been losing money to "market timers" for several years. In many cases, these individuals have been private investors who have been taking advantage of predictability in mutual fund share prices.
"Based on our study, we estimate that profits to these 'market timers' come at the expense of the buy-and-hold shareholders in the fund to the tune of more than $1 Billion per year," says Greene.
"With that sum being so large, it is feasible, as the Attorney General has suggested, that some large market participants, such as hedge funds, might be trading mutual funds. If they are doing this with the knowledge and active help of the mutual fund companies, then the fund industry and its regulators have an uphill battle to maintain or regain the trust of the investing public."
The J. Mack Robinson College of Business is one of the nation's top business schools. The College's Flex (part-time) MBA program has been listed in the top ten by U.S. News for the past eight years and its undergraduate business program is ranked among the top 50 in the nation. BusinessWeek magazine ranked the College's Executive MBA program 20th in the world and Forbes rated Robinson in the top 20 for return-on-investment for regional schools. Georgia State University's Robinson College of Business has an enrollment for more than 8000 students and is located in downtown Atlanta.
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