Precision about manager skill, mutual fund flows, and performance persistence

Hyunglae Jeon, Jangkoo Kang and Changjun Lee

The North American Journal of Economics and Finance, 2017, vol. 40, issue C, 222-237

Abstract: Constructing a measure for imprecision about manager skill, IMP, by standard deviation of multiple performance-based signals, we examine the role of IMP in flow-performance relationship. We find that future fund flows respond more (less) strongly to past performance measured with high (low) precision. Our finding is robust to the inclusion of control variables that are known to affect future fund flows. In addition, short-term performance persistence is observed among funds with lower IMP, implying that our IMP helps identify funds with performance persistence. Overall, our findings indicate that IMP plays a critical role in understanding the cross-section of future flows.

Keywords: Mutual fund flows; Flow-performance relationship; Precision about manager skill; Investor behavior (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:40:y:2017:i:c:p:222-237

DOI: 10.1016/j.najef.2017.03.002

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