Performance information dissemination in the mutual fund industry

Alexei Goriaev, Theo E. Nijman and Bas J.M. Werker

Journal of Financial Markets, 2008, vol. 11, issue 2, pages 144-159

Abstract: This paper studies the dissemination of performance information in the mutual fund industry. We document a hump-shaped lag pattern for the reaction of mutual fund flows to past performance, i.e., we find that very recent performance is less important than performance several months ago. We attribute this pattern to the presence of less sophisticated investors that update performance information only infrequently. In the 1990s the effect is observed for all funds, but is especially pronounced for highly marketed funds. For the 2000s, we find a substantial increase in the overall probability of investors timely updating mutual fund performance information. As a result, the hump-shaped flow-performance lag pattern disappeared for all but the highly marketed funds.

Date: 2008
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Persistent link: http://EconPapers.repec.org/RePEc:eee:finmar:v:11:y:2008:i:2:p:144-159

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