Misspecifications in the fund flow-performance relationship

Yeonjeong Ha and Kwangsoo Ko

Journal of Financial Intermediation, 2019, vol. 38, issue C, 69-81

Abstract: This study shows the importance of return discrimination between funds in the flow-performance relationship. To do so, we employ objective-adjusted returns rather than performance ranks. We demonstrate that the net flow-performance relationship is a direct consequence of the convex inflow- and outflow-performance relationships, and that fund size and age have no significant effect on these relationships. When we measure past performance using 12-month objective-adjusted returns, we find a linear net flow-performance relationship after controlling for the investor-substitution effect.

Keywords: Mis-measured performance; Return discrimination; Flow-performance relationship; Inflows and outflows; Investor-substitution effect (search for similar items in EconPapers)
JEL-codes: G10 G11 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:38:y:2019:i:c:p:69-81

DOI: 10.1016/j.jfi.2018.11.001

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