Eric Zitzewitz, assistant professor of economics at Stanford University’s Graduate School of Business, released findings of a study Thursday showing that late trading is more common than fund executives or regulators might have suspected, Reuters reports.

A summary of his study that appeared in New York Attorney General Eliot Spitzer’s case against Canary Capital Partners indicates the practice might cost $4 billion a year. Zitzewitz told Reuters that at least $400 million of this is at the direct expense of average investors.

Zitzewitz found that 15 out of 50 international funds were guilty of late trading. That would extrapolate to as much as 30% of international funds. Among domestic funds, the professor discovered late trading by 12 funds out of 96, or 12%.

"This is such an egregious violation of a fund manager’s fiduciary responsibilities that one might suppose that it was limited to a few isolated cases," Zitzewitz wrote in his study.

__

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.