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Investor Attrition And Fund Flows In Mutual Funds
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Book Synopsis Investor Attrition and Fund Flows in Mutual Funds by : Susan Kerr Christoffersen
Download or read book Investor Attrition and Fund Flows in Mutual Funds written by Susan Kerr Christoffersen and published by . This book was released on 2015 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the properties of equity mutual funds that experience a loss of assets after poor performance. We document that both inflows and outflows are less sensitive to performance because performance-sensitive investors leave or decide not to invest after bad performance. Consistent with the idea that attrition measures the sorting of performance-sensitive investors, we find that attrition has less of an impact on the fund's flow-performance sensitivity for institutional funds where there is less dispersion in investor performance- sensitivity. Also attrition has no effect on the flow-performance sensitivity when attrition arises after good performance or investors invest for non-performance reasons.
Book Synopsis Mutual Fund Performance and Performance Persistence by : Peter Lückoff
Download or read book Mutual Fund Performance and Performance Persistence written by Peter Lückoff and published by Springer Science & Business Media. This book was released on 2011-01-13 with total page 604 pages. Available in PDF, EPUB and Kindle. Book excerpt: Peter Lückoff investigates why fund flows and manager changes act as equilibrium mechanisms and drive the performance of both previously outperforming and previously underperforming funds back to average levels.
Book Synopsis Investment Criteria for Mutual Fund Selection by : Jan Harkopf
Download or read book Investment Criteria for Mutual Fund Selection written by Jan Harkopf and published by Anchor Academic Publishing. This book was released on 2016-10 with total page 93 pages. Available in PDF, EPUB and Kindle. Book excerpt: The importance of mutual funds for individual investors has increased in recent decades. This becomes apparent when looking at the increased share of households owning mutual funds. These mutual fund investors usually want to receive a return which is above or at least close to the mutual fund’s benchmark. Consequently, investors want to invest in those funds which will show these patterns in the future. Some of these mutual funds receive much attention, since they generate extraordinary high performance. But the question that remains is whether it is possible to predict such performance before funds exhibit such outstanding performance. In the past, mutual fund investors focused extensively on performance or performance linked patterns, like the Morningstar star rating, and thus chased past performance. This seems surprising since performance persists only over a short time and is more persistent to weak mutual funds (1 and 2 star rated) than well performing mutual funds. Thus, chasing past performances seems to be a rather inferior strategy. Therefore, investors should try to identify alternative tools showing a high correlation to future mutual fund performance. In this book, mutual funds are analysed, especially open-end mutual funds and actively managed mutual funds. The main focus is on what purpose and usefulness active investments have and whether performance is persistent and what the determinants of mutual fund flows are. Moreover, some alternative measures will be introduced by explaining which attributes or methods should be used and avoided when selecting mutual funds.
Book Synopsis Diversification and Portfolio Management of Mutual Funds by : G. Gregoriou
Download or read book Diversification and Portfolio Management of Mutual Funds written by G. Gregoriou and published by Springer. This book was released on 2015-12-17 with total page 446 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book addresses the importance of diversification for reducing volatility of investment portfolios. It shows how to improve investment efficiency, and explains how international diversification reduces overall risk while enhancing performance. This book is a crucial tool for any investor looking to improve the profit gain from their investment.
Book Synopsis Individual Investor Mutual-fund Flows by : Zoran Ivković
Download or read book Individual Investor Mutual-fund Flows written by Zoran Ivković and published by . This book was released on 2008 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the relation between individuals' mutual fund flows and fund characteristics, establishing three key results. First, consistent with tax motivations, individual investors are reluctant to sell mutual funds that have appreciated in value and are willing to sell losing funds. Second, individuals pay attention to investment costs as redemption decisions are sensitive to both expense ratios and loads. Third, individuals' fund-level inflows and outflows are sensitive to performance, but in different ways. Inflows are related only to "relative" performance, suggesting that new money chases the best performers in an objective. Outflows are related only to "absolute" fund performance, the relevant benchmark for taxes.
Book Synopsis The Abcs of Mutual Funds by : Vikram K. Nanda
Download or read book The Abcs of Mutual Funds written by Vikram K. Nanda and published by . This book was released on 2009 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the 1990s, a large majority of funds with front-end loads introduced additional share classes, which allowed investors to pay annual fees and/or back-end charges instead of a front-end load. The transition to a multiple-class structure provides a natural experiment with regard to investor clienteles and fund performance. We examine (a) whether the new fee structures increase fund cash flows by attracting investors with different investment horizons and sensitivities to performance; (b) whether changes in the volatility and level of fund flows induced by new investor clienteles affect fund performance - despite little change in fund management and investment objectives. Our finding is that the multiple-class funds, after controlling for performance and fund attributes, attract significantly more new money than the single-class funds. Consistent with the clientele hypothesis, investors in the new classes tend to have a shorter investment horizon and a greater sensitivity to fund performance than investors in the front-end load class. The downside to introducing the new classes, however, is a significant drop in fund performance, which erodes the cash flow benefit of the new classes. Furthermore, the performance drop is shown to be increasing in the relative size of the new classes and in the volatility of their fund flows.
Book Synopsis Investor Learning and Mutual Fund Flows by : Jennifer C. Huang
Download or read book Investor Learning and Mutual Fund Flows written by Jennifer C. Huang and published by . This book was released on 2012 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the implications of investor learning for the sensitivity of mutual fund flows to past performance. We illustrate theoretically that when some sophisticated investors learn from past fund performance to form their posterior expectations of managerial ability, the flow-performance sensitivity should be weaker for funds with more volatile past performance and longer track records. Moreover, the dampening effects of performance volatility and fund age on the flow-performance sensitivity should be stronger for funds attracting more sophisticated investors. We provide supporting evidence for this investor learning hypothesis using mutual fund flows and compare the relative level of sophistication among investors in load versus no-load funds, institutional versus retails funds, and star versus non-star funds.
Book Synopsis The Investor's Dilemma by : Louis Lowenstein
Download or read book The Investor's Dilemma written by Louis Lowenstein and published by John Wiley & Sons. This book was released on 2008-03-31 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: Based on cutting-edge research by leading corporate critic Louis Lowenstein, The Investor’s Dilemma: How Mutual Funds Are Betraying Your Trust and What to Do About It reveals how highly overpaid fund sponsors really operate and walks you through the conflicts of interest found throughout the industry. Page by page, you’ll discover the real problems within the world of mutual funds and learn how to overcome them through a value-oriented approach to this market.
Download or read book Mutual Funds written by Donald Edwards and published by Novinka Books. This book was released on 2016-12-19 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The authors of this book provide and discuss new research on performance measurements, types, and impacts on stock returns of mutual funds. Chapter One reviews the theoretical and empirical literature relating to mutual fund performance, screening, and fund flows. Chapter Two examines performance of Thai equity mutual funds over 5-year time periods of investment. Chapter Three provides mutual fund prediction models using artificial neural networks and genetic programming.
Book Synopsis Three Essays on Mutual Funds by : Xuemei Guo
Download or read book Three Essays on Mutual Funds written by Xuemei Guo and published by . This book was released on 2017 with total page 312 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation investigates the determinants of mutual fund flows and mutual fund performance. The first chapter examines the response of fund investors to style volatility and the impact of style volatility on the flow-performance relationship. Three main empirical findings are obtained using both a portfolio approach and a multivariate regression approach. First, I find that there is a significant positive relationship between the style volatility and the subsequent fund flows to mutual funds. This finding can be interpreted as either fund managers having style timing ability or fund managers catering to investors preferences or tastes. Second, the positive relationship between past style volatility and fund flows is less pronounced for funds with superior past performance. Lastly, fund style volatility has a dampening effect on the flow-performance relationship: the flow-performance sensitivity weakens by 12% when the past style volatility increases by one standard deviation. It is likely that performance is perceived as a less informative signal of investment ability for fund managers who follow inconsistent styles over time. The second chapter studies how the response of fund investors to past risk varies over business cycles. I employ the NBER boom indicator, the Consumer Sentiment Index, and the National Activity Index to proxy for economic conditions. I find that mutual fund investors react differently to risk across economic environments. Funds with more volatile past returns discourage fund investors. The investors’ demand for actively managed funds is higher under good market conditions. Fund flows are less responsive to risk during expansionary economic periods. This finding may indicate that fund investors are risk averse and become less risk averse in good market states. The third chapter empirically examines whether mutual fund performance is affected by prior family performance. I propose two testable hypotheses: the information and resource sharing hypothesis and the cross-fund subsidization hypothesis. The empirical findings suggest that there is a significant positive relationship between prior family performance and subsequent fund performance. This finding is consistent with the hypothesis that mutual funds in the same family share informational resources. This positive relation also justifies the finding in the mutual fund flow literature that fund flows are higher for funds with higher past family performance. Furthermore, I find that the predictive power of the prior family performance is stronger in larger fund families.
Book Synopsis Mutual Fund Flows and Investor Returns by : Geoffrey C. Friesen
Download or read book Mutual Fund Flows and Investor Returns written by Geoffrey C. Friesen and published by . This book was released on 2009 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the timing ability of mutual fund investors using cash flow data at the individual fund level. Over 1991-2004 equity fund investor timing decisions reduce fund investor average returns by 1.56% annually. Underperformance due to poor timing is greater in load funds and funds with relatively large risk-adjusted returns. In particular, the magnitude of investor underperformance due to poor timing largely offsets the risk-adjusted alpha gains offered by good-performing funds. Investors in both actively managed funds and index funds exhibit poor investment timing. We demonstrate that our empirical results are consistent with investor return-chasing behavior.
Book Synopsis The Long and the Short by : Anne M. Tucker
Download or read book The Long and the Short written by Anne M. Tucker and published by . This book was released on 2018 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mutual fund portfolio turnover ratios (PTR) are at the center of the short-termism debate, which criticizes corporate maneuvers taken to prop up near-term earnings at the expense of long-term, value focused investments and policies. Scholars and policymakers often rely on portfolio turnover ratios to argue that mutual fund short-termism, as measured by the PTR, is increasing and infecting operating company time horizons. This article answers two main questions central to discerning mutual funds' role in the short-termism debate. The first is, how long, on average do U.S. registered mutual funds hold onto their assets? The second is, how good of a measure is the PTR at approximating mutual fund holding patterns in light of criticisms that the PTR is an indirect measure, does not reflect fund flows, and excludes investment strategy considerations?Using a unique data set of U.S. registered mutual funds from 2005-15, this Article finds that mutual fund investment time horizons, as measured by portfolio turnover ratios, did not decline during 2005-15. This finding holds for all major categories of mutual funds, including index funds and actively managed funds and produced an average holding period in the range of fifteen to seventeen months. Based on this analysis, scholars and policymakers may think of mutual fund investment time horizons as short, but not shortening. These findings are confirmed by three alternative measurements of time horizons: Duration, Churn Rates, and Modified Portfolio Turnover. Consistent across-measure results mitigate PTR criticisms as a rough estimate of time horizons and endorse its continued use in SEC reporting. These observations also validate policymakers' and scholars' use of mutual fund PTRs in legal and policy debates, and contribute current, empirical evidence adding nuance to claims of mutual fund short-termism.
Book Synopsis Mutual Fund Flows and Performance Streaks - How Mutual Fund Selection is Driven by Behavioural Biases by : Kai Aschick
Download or read book Mutual Fund Flows and Performance Streaks - How Mutual Fund Selection is Driven by Behavioural Biases written by Kai Aschick and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contributes to existing literature by analysing the role of performance streaks in the US mutual fund industry. Existing research suggests that performance streaks, i.e. multiple consecutive months of positive or negative performance, are an important determinant of mutual fund flows. My dataset comprises monthly returns and net-flows from US equity mutual funds from 1996 through 2015. My first analysis shows that streaks are not an indication of performance persistence and should not be used in investment decisions. Next, I develop two forecasting models using streaks based on several different performance metrics, such as excess returns and CAPM-alphas. The first one is a probit model that forecasts future investor sentiment, measured by the sign of future net-flows. This model is very robust to different time period specifications. The second one is a multiple linear regression model that forecasts actual future net- flows. The performance of this model strongly depends on the time period specified, as it performs poorly following the financial crisis. In both models the best-performing specification uses streaks based on CAPM-alphas. However, a Shapley decomposition reveals that streaks are, despite being statistically significant, the least-important predictors of future net-flows. Instead, lagged net-flows are the most-important determinants of future net-flows. The results of this thesis suggest that active streaks tip the scales when investors decide between two or more funds with a comparable track record. Hence, the results presented are ambiguous regarding investor rationality.
Download or read book Mutual Funds written by Seth Anderson and published by Springer Science & Business Media. This book was released on 2006-03-30 with total page 169 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mutual funds are the dominant form of investment companies in the United States today, with approximately $7 trillion in assets under management. Over the past half century an important body of academic research has addressed various issues about the nature of these companies. These works focus on a wide range of topics, including fund performance, investment style, and expense issues, among others. MUTUAL FUNDS: Fifty Years of Research Findings is designed for the academic researcher interested in the various issues surrounding mutual funds and for the practitioner interested in funds for investment purposes. The authors briefly trace the historical evolution of funds, present important aspects of the Investment Company Act of 1940, and then summarize a substantial portion of the academic literature which has been written over the past five decades. "This book presents an outstanding wealth of information on mutual funds in a remarkably readable format. It is probably the most comprehensive work currently available on funds. The book sheds light on the numerous issues surrounding mutual fund performance and pricing and is an important resource for any serious investor." Kathleen A. Wayner, Bowling Portfolio Management, President and CEO
Book Synopsis Systematic Fund Flows and Investor Clienteles in Mutual Funds? by : Martin Progin
Download or read book Systematic Fund Flows and Investor Clienteles in Mutual Funds? written by Martin Progin and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores a new approach to studying the relationship between mutual fund flows and performance. While academicians often work with either monetary or normalised flows, I base my study on a metric called "flow beta" which measures the sensitivity of fund flows to market flows. A greater exposure to market flows induces forced trading in adverse market conditions. Performances of high flow beta funds suffer from the lack of liquidity. An increase of 1 unit in the flow beta leads, on average, to a lower abnormal return of 6 bps p.a. Moreover, flow beta can be traced back to specific clientele. Institutional investors, considered more financially sophisticated, exhibit a lower sensitivity to market flows. Inferior performance for funds with higher flow beta amongst funds dedicated to professional investors was not identified, whereas flow beta penalises purely retail funds.
Book Synopsis Selling Winners, Holding Losers by : Lily Xu
Download or read book Selling Winners, Holding Losers written by Lily Xu and published by . This book was released on 2009 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether U.S. equity mutual funds exhibit a disposition bias, the tendency to sell winners and hold losers, and how this influences performance, investor flows and fund survival. About 30% of all funds exhibit some degree of disposition behavior. Funds with a disposition bias underperform funds that are not disposition prone by 4-6% per year. Moreover, even after controlling for performance, tax overhang and other factors that potentially affect flows, funds with a disposition bias attract significantly smaller flows than other funds. These results suggest that performance and tax efficiency are all important to mutual fund investors. Rational explanations for a disposition bias are not supported by the evidence. However, we find that mutual fund investors are smart enough to minimize investment in disposition-prone funds. As a result, these funds have significantly higher rates of failure than other funds, thereby potentially reducing the impact of irrational trading behavior on security prices.
Download or read book Dumb Money written by Andrea Frazzini and published by . This book was released on 2010 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use mutual fund flows as a measure for individual investor sentiment for different stocks, and find that high sentiment predicts low future returns at long horizons. Fund flows are dumb money %uF818 by reallocating across different mutual funds, retail investors reduce their wealth in the long run. This dumb money effect is strongly related to the value effect. High sentiment also is associated high corporate issuance, interpretable as companies increasing the supply of shares in response to investor demand.
