Fund flow bias in market timing skill. Evidence of the clientele effect

Fernando Muñoz, Maria Vargas and Ruth Vicente

International Review of Economics & Finance, 2014, vol. 33, issue C, 257-269

Abstract: This paper investigates whether profit-seeking and values-driven investor decisions have an impact on the timing ability of socially responsible mutual fund managers. Surprisingly, we find evidence of successful market timing skill for positively screened mutual fund managers who fulfill the objectives of profit-seeking investors, demonstrating the importance of controlling for the clientele effect. This result may indicate a successful, forward-looking management style in this type of fund. Furthermore, we present certain evidence of the “smart money” phenomenon among profit-seeking investors who pursue the persistent component of returns and thus cause a downward bias in market timing skill.

Keywords: Cash flows; Market timing; Mutual funds; Socially responsible investments; Screens (search for similar items in EconPapers)
JEL-codes: A13 G11 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:33:y:2014:i:c:p:257-269

DOI: 10.1016/j.iref.2014.05.006

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