Mutual Fund Flows and Seasonalities in Stock Returns
John Byong-Tek Lee and
Working Papers in Economics from University of Canterbury, Department of Economics and Finance
We propose a flow-based explanation for two long-standing anomalies in empirical finance – the Sell in May effect and the January effect. We find that the aggregate mutual fund flows exhibit similar seasonal patterns as stock returns. The Sell in May effect becomes insignificant in standard statistical tests after controlling for the impact of mutual fund flows on returns, with flow explaining about 54% of the variation in excess returns over the winter months. We also find that flow helps explaining the abnormally high returns of small-cap stocks in January. The Sell in May and January effects appear to be primarily a retail money effect. Similarly, the well-known co-movement between flow and market return is only present in retail fund flow. Overall, the evidence suggests that unanticipated rather than expected flow drives our results.
Keywords: Mutual funds; Fund flows; Return seasonality (search for similar items in EconPapers)
JEL-codes: G12 G14 G23 (search for similar items in EconPapers)
Pages: 39 pages
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:18/17
Access Statistics for this paper
More papers in Working Papers in Economics from University of Canterbury, Department of Economics and Finance Private Bag 4800, Christchurch, New Zealand. Contact information at EDIRC.
Bibliographic data for series maintained by Albert Yee ().