The smart money effect in Germany – do investment focus and bank-affiliation matter?

Kim J. Heyden and Florian Röder

The European Journal of Finance, 2020, vol. 26, issue 12, 1125-1145

Abstract: We investigate the smart money effect in the German mutual fund market from 2001 to 2016. Results show a positive relation between fund flows and subsequent performance for mutual funds with a European or international diversified investment focus. Funds that invest domestically, however, show no signs of a smart money effect. Moreover, evidence suggests that flows to funds managed by bank-affiliated investment companies are smart. We argue that less sophisticated investors rather invest domestically and that financial advice improves retail investors’ mutual fund investment decisions.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:26:y:2020:i:12:p:1125-1145

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DOI: 10.1080/1351847X.2020.1720261

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