When is money smart? Mutual fund flows and disposable income

Swasti Gupta-Mukherjee

Finance Research Letters, 2021, vol. 39, issue C

Abstract: This study shows that the representative mutual fund investor's ability increases with the time-varying constraints on household disposable income at the aggregate level. I use changes in retail energy prices to proxy for short-run changes in the disposable income of potential investors. Flows to actively-managed U.S. equity funds decrease with the constraints on disposable income. The representative investor shows fund selection and timing ability in periods when the constraints on disposable income sharply increase, but no discernable ability otherwise. The results are consistent with money being smarter when the constraints on household disposable income in the economy are more binding.

Keywords: Investor ability; Disposable income; Mutual fund flows; Household finance; Energy prices (search for similar items in EconPapers)
JEL-codes: D14 G11 G23 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:39:y:2021:i:c:s1544612320302373

DOI: 10.1016/j.frl.2020.101609

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