 How do investors trust mutual funds in cliques: Case in ChinaXiaojun Liu, Hongbing Ouyang and Jingqi Chen Pacific-Basin Finance Journal, 2025, vol. 93, issue C Abstract: We study how investors' beliefs respond to fund cliques and how they adapt capital allocation across funds in the cliques. Using holdings-based fund network identification, we demonstrate that fund flows are significantly predicted by both a fund's past performance and the performance of other funds within its clique, revealing systematic cross-fund learning. Investors exhibit sophistication in this process: they preferentially reference clique peers when their focal fund holds peripheral network status (low centrality) and respond to indirect connections beyond direct ties. Critically, while capital flows directionally align with performance signals (validating partial rationality), investors under-withdraw from underperforming clique funds due to risk aversion constraints specific to China's market. Our findings illuminate a stability-efficiency tradeoff: clique-driven capital allocation enhances returns but exacerbates agglomeration risks, highlighting the need for regulators to monitor network aggregation as a systemic vulnerability indicator for emerging markets. Keywords: Mutual fund cliques; Investors beliefs; Fund performance; Complex network (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:93:y:2025:i:c:s0927538x25002185 DOI: 10.1016/j.pacfin.2025.102881 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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