Mutual fund flows’ performance reaction: does convexity apply to small markets?
Carlos Alves () and
Victor Mendes ()
FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto
In this paper we study the performance reaction of investors in a small market context. Instead of the asymmetrical investors’ reaction to winners and losers, as usually documented for the US, an absence of risk-adjusted performance reaction was observed. The absence of reaction can be attributed to either lower investor sophistication, conflicts of interests in the context of the Portuguese universal banking industry, or the existence of relevant back-end load cost which prevent investors from reacting. A high persistence of net investment flows was also noted. Our results are consistent with the idea that the financial groups with larger market shares have the capacity “to drive” their customers to funds with larger fees. This practice emerges as a non-transparent means of increasing prices.
Keywords: Mutual Funds; Performance Reaction; Investor Behaviour; Small Markets and Regulation (search for similar items in EconPapers)
JEL-codes: G20 G23 G28 (search for similar items in EconPapers)
Pages: 21 pages
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:204
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