Rounded Fund Prices Can Create Apparent Zero Returns

Summary

The document investigates why a market-neutral mutual fund appears to have many days with no price change. The proposed explanation is price rounding: when published fund prices are shown to only two decimal places, small daily moves may disappear in the reported series. The response illustrates this using the fund’s approximate average price and daily return distribution, then estimates the probability that a normally distributed daily move falls within the rounding interval.

The calculation gives a probability close to the observed frequency of flat reported returns, making rounding a plausible explanation without requiring periodic portfolio liquidation. This is an interpretation rather than proof of the fund’s trading or valuation process. It depends on the displayed price precision and on treating daily returns as approximately normal; the post does not examine alternative causes or the underlying unrounded net asset values.

Key ideas

• Prices displayed to two decimal places can conceal small daily changes.
• The response models daily returns as approximately normal to estimate how often rounding produces a reported zero.
• The estimated frequency is close to the observed share of flat returns, supporting rounding as a plausible explanation.
• The analysis does not verify the underlying unrounded prices or rule out other explanations.

Tags

# Where do the zero returns in QMNIX (AQR Market Neutral) come from?


# Where do the zero returns in QMNIX (AQR Market Neutral) come from?












QMNIX, Which is a market neutral offering from AQR, has a surprising number of totally flat days. https://finance.yahoo.com/quote/QMNIX%3FP%3DQMNIX/history/

Looking at the returns, 124 of them, which is 10.39%, have been exactly 0 since inception.

Does this imply that they are periodically liquidating the portfolio positions, or could there be another explanation?

## Answer by D Stanley (score 2, accepted)

https://quant.stackexchange.com/a/46553

I think it's more than likely just rounding. The prices only go out to two places past the decimal, so a 1 cent change would be about a 0.1% daily return (with a \$10 average price). Looking at the returns from a purely statistical standpoint, the average daily absolute return is \$-0.0062 with a standard deviation of \$0.042.

If you assume a normal distribution (which should be OK since we don't get close to 0), there is about a 9.3% probability that the daily return is between -0.005 and +0.005, so seeing 0 change about 10% of the time is not unreasonable.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.