We demonstrate that an institutional feature of numerous mutual funds - funds managing billions in assets - generates fund net asset values that reflect stale prices. Because investors can trade at these NAVs with limited transaction costs in many cases, obvious trading opportunities exist....

This paper demonstrates that an an institutional feature inherent in amultitude of mutual funds managing billions in assets generates fund NAVs that reect stale prices. Since, in many cases, investors can trade at these NAVs with little or no transactions costs, there is an obvious...