Who creates and who bears flow externalities in mutual funds?

Daniel Fricke, Stephan Jank and Hannes Wilke

No 41/2022, Discussion Papers from Deutsche Bundesbank

Abstract: Using a unique dataset on the sectoral ownership structure of euro area equity mutual funds, we study how different investor groups contribute to the negative performance externality from large outflows. Investment funds, as holders of mutual funds, are the main contributors to the flow externality. Insurers and households, in particular less financially-sophisticated ones, are the main receivers. These differences are due to investment funds reacting more strongly on past performance and displaying a more procyclical investment behavior compared to households and insurers. Our results raise consumer protection and financial stability concerns due to the trading activity of short-term oriented investors.

Keywords: asset management; mutual funds; externalities; contagion; performance (search for similar items in EconPapers)
JEL-codes: G10 G11 G23 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-eec, nep-fmk and nep-ifn
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:412022

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