Investor behavior in the mutual fund industry: evidence from gross flows

George Cashman (), Federico Nardari, Daniel Deli and Sriram Villupuram

Journal of Economics and Finance, 2014, vol. 38, issue 4, 567 pages

Abstract: Using a large sample of monthly gross flows from 1997 to 2003, we uncover several previously undocumented regularities in investor behavior. First, investor purchases and sales produce fund-level gross flows that are highly persistent. Persistence in fund flows dominates performance as a predictor of future fund flows. More importantly, failing to account for flow persistence leads to incorrect inferences with respect to the relation between performance and flows. Second, we document that investors react differently to performance depending on the type of fund, and that investor trading activity produces meaningful differences in the persistence of fund flows across mutual fund types. Third, at least some investors appear to evaluate and respond to mutual fund performance over much shorter time spans than previously assessed. Additionally, we document differences in the speed and magnitude of investors’ purchase and sales responses to performance. Copyright Springer Science+Business Media, LLC 2014

Keywords: Mutual Funds; Performance Flow Relation; Mutual Fund Flows; G23; L14 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (16)

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DOI: 10.1007/s12197-012-9231-1

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