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Mutual Fund Flow Performance Relationship Under Volatile Market Condition
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Book Synopsis Mutual Fund Flow-Performance Relationship Under Volatile Market Condition by : Mingsheng Li
Download or read book Mutual Fund Flow-Performance Relationship Under Volatile Market Condition written by Mingsheng Li and published by . This book was released on 2013 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the relationship between flows and performance of Chinese mutual funds that trade in a volatile market environment. Consistent with existing literature, we find that the net flow to a fund is positively related to past fund performance. Contrary to previous studies using samples in the U.S. and other countries, our results do not exhibit an asymmetric flow-performance relationship, nor do we find any significant star effect in China. These results imply that market volatility plays an important role in reducing the asymmetric flow-performance relationship. Furthermore, we find that the positive relationship is more pronounced during bull markets than during bear markets. This suggests that Chinese mutual fund investors are more confident and invest more aggressively when stock markets perform well.
Book Synopsis Volatile Market Condition and Investor Clientele Effects on Mutual Fund Flow Performance Relationship by : Jun Xiao
Download or read book Volatile Market Condition and Investor Clientele Effects on Mutual Fund Flow Performance Relationship written by Jun Xiao and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze mutual fund flow-performance relationship using a novel sample of Chinese mutual funds that trade in a volatile market environment. Consistent with existing literature, we find that the net flow to a fund is positively related to past fund performance. However, the positive flow-performance relationship weakens when the stock market is divided into high and low volatile periods or when funds are divided into good and poor performers. Contrary to previous studies using samples in U.S. and other countries, our results do not exhibit an asymmetric flow-performance relationship, nor do we find any significant Morningstar rating effect or smart money effect. Furthermore, we find that the overall stock market performance is the primary driving force of flow-performance relationship and the positive relationship is more pronounced in bull markets. Consistent with Thaler and Johnson's (1990) house money effect and the overconfidence hypothesis proposed by Gervais and Odean (2001), this suggests that Chinese mutual fund investors are vulnerable to market conditions. The overall results imply that market conditions and investor clientele differences play an important role in fund investments and flow-performance relationships.
Book Synopsis Swing Pricing and Fragility in Open-end Mutual Funds by : Dunhong Jin
Download or read book Swing Pricing and Fragility in Open-end Mutual Funds written by Dunhong Jin and published by International Monetary Fund. This book was released on 2019-11-01 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: How to prevent runs on open-end mutual funds? In recent years, markets have observed an innovation that changed the way open-end funds are priced. Alternative pricing rules (known as swing pricing) adjust funds’ net asset values to pass on funds’ trading costs to transacting shareholders. Using unique data on investor transactions in U.K. corporate bond funds, we show that swing pricing eliminates the first-mover advantage arising from the traditional pricing rule and significantly reduces redemptions during stress periods. The positive impact of alternative pricing rules on fund flows reverses in calm periods when costs associated with higher tracking error dominate the pricing effect.
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 International Mutual Fund Flows by : Dilip K. Patro
Download or read book International Mutual Fund Flows written by Dilip K. Patro and published by . This book was released on 2006 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: The last few decades has witnessed a dramatic growth of U.S. based mutual funds that invest in non-U.S. stock markets. This paper provides a comprehensive analysis of flows into these international mutual funds for 1970-2003. Our analysis uncovers several new facts about mutual fund flows. First, the empirical findings show a strong relationship between flows into U.S. based international mutual funds and the correlation between the returns of the fund's assets and the returns of the U.S. market, consistent with investors' desire for international diversification. Furthermore, a stronger flow-performance relationship is observed when these correlations are low. As expected, the flows are lower when the volatility of the fund is higher. Second, the flows are related to contemporaneous and past fund returns supporting an 'information asymmetry' as well as 'return chasing' hypothesis for international capital flows. Finally, there is some evidence of fund outflows prior to or during the currency crises in emerging markets.
Book Synopsis Dynamics of Cross-Border Flow-Performance Relationships by : Simon Weiler
Download or read book Dynamics of Cross-Border Flow-Performance Relationships written by Simon Weiler and published by Springer. This book was released on 2014-11-19 with total page 107 pages. Available in PDF, EPUB and Kindle. Book excerpt: In order to measure the dynamics of flow-performance relationships for a multi-domicile sample, Simon Weiler applies existing flow-performance research methods to a broad set of European equity (UCITS) funds and proves that major findings (performance-chasing behaviour and a convex flow-performance relationship) also hold true in a cross-border market environment.
Book Synopsis Asset Allocation Strategies for Mutual Funds by : Giuseppe Galloppo
Download or read book Asset Allocation Strategies for Mutual Funds written by Giuseppe Galloppo and published by Springer Nature. This book was released on 2021-07-24 with total page 485 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book offers an overview of the best-working strategies in the field of equity and fixed income mutual fund-based portfolio management. This timely research considers different market conditions, such as global financial crises, across various geographical regions such as the USA and Europe. Combining academic and practical findings, the author presents a practitioner perspective on mutual fund-based portfolio strategies, appealing not only to finance scholars but also professionals within the asset management industry. This book synthesizes a large part of the academic research to date on the mutual fund industry by drawing from the most widely cited academic journals. The author makes a systematic use of numerical examples to facilitate the understanding of Investment themes organized around several important topics: size, diversification, flows, active management, volatility, performance persistence and rating.
Book Synopsis Mutual Fund Risk and Market Share Adjusted Fund Flows by : Matthew I. Spiegel
Download or read book Mutual Fund Risk and Market Share Adjusted Fund Flows written by Matthew I. Spiegel and published by . This book was released on 2014 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Multiple studies have examined the relationship between performance and subsequent fund flows. Prior work takes a fund's dollar flows divided by its assets under management as the dependent variable. However, individual fund flows have to add up to the aggregate flow in every period. If aggregate flows are high, then on average individual flows will be so, and vice-versa. To accommodate this accounting identity, this paper uses market share as the dependent variable. Unlike percentage flows, market shares always add to the aggregate value: one. With market shares as the focus, the conclusion drawn here is that adding volatility to a fund's return process does not increase a firm's funds under management. Thus, contrary to some prior conclusions, this paper does not find support for the idea that fund flows provide managers with an incentive to engage in additional risk taking.
Book Synopsis The Behavior of Fixed-income Funds during COVID-19 Market Turmoil by : Mr.Frank Hespeler
Download or read book The Behavior of Fixed-income Funds during COVID-19 Market Turmoil written by Mr.Frank Hespeler and published by International Monetary Fund. This book was released on 2020-12-14 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: This note analyzes the stress experienced (and caused) by open-end mutual funds during the March COVID-19 stress episode, with a focus on global fixed-income funds. In light of increased valuation uncertainty, funds experienced a short period of intense withdrawals while the market liquidity of their holdings deteriorated substantially. To cover redemptions, afflicted funds predominantly shed liquid assets first—for example, cash, cash equivalents, and US Treasury securities. But forced asset sales amplified price pressures in markets and contributed to liquidity falling across fixed-income markets. This drop in market liquidity, as well as the general stress in financial markets, may have led to fund investors becoming even more sensitive to challenging portfolio performance and encouraged further withdrawals. Only after central banks intervened, directly and indirectly supporting asset managers, did liquidity and redemption stress subside. Overall, the March episode validated the financial-stability concerns about liquidity vulnerabilities in the fund industry and calls for further action to address them.
Book Synopsis A Study of Mutual Fund Flow and Market Return Volatility by :
Download or read book A Study of Mutual Fund Flow and Market Return Volatility written by and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: (Uncorrected OCR) Abstract of thesis entitled A Study of Mutual Fund Flow and Market Return Volatility Submitted by YingWANG for the Degree of Master of Philosophy at The University of Hong Kong in June 2003 Abstract Whether institutional trading stabilizes or destabilizes the market has long been a controversial issue that interests practitioners and academicians. In this study, we investigate the impact of institutional trading on the market by examining the daily relationship between aggregate flow into U.S. equity funds and market return volatility. We adopt three estimators of daily market volatility: (1) the high-frequency volatility estimated from the intraday return data of S & P 500 index, using the method of Andersen, Bollerslev, Diebold and Labys (2001) and Andersen, Bollerslev, Diebold and Ebens (2001), (2) the high-low volatility estimator developed by Parkinson (1980), and (3) the implied volatility index based on the option of the S & P 100 index. Our daily flow data are from the same source of Edelen and Warner (2001), but over a longer period, i.e., from February 3, 1998 to December 29,2002. Our initial evidence suggests a negative contemporaneous relationship between market volatility and aggregate mutual fund flow across the whole flow range. We further examine the relationships of market volatility and fund inflow and fund outflow, respectively. Our empirical results show that an asymmetric concurrent relationship between fund flow and market volatility exists: fund inflow is negatively correlated with market volatility, whereas fund outflow is positively correlated with market volatility. We discuss potential explanations for our results and suggest that they are consistent with information content differences between mutual funds' buy and sell orders. Our study also implies that individual investors and fund managers play joint roles in the market. We also investigate the daily relationship between idiosyncratic volatility and aggregate mutual fund.
Book Synopsis Three Perspectives of Mutual Fund Performance by : Steve A. Nenninger
Download or read book Three Perspectives of Mutual Fund Performance written by Steve A. Nenninger and published by . This book was released on 2009 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines mutual fund performance from the points of view of three distinct, but interrelated parties: individual investors, financial advisors, and the boards of directors of mutual fund companies. In the first essay, the flow-performance sensitivity of no-load funds and the three main classes of load fund shares are compared, assuming investment advisors are more likely to guide the decision-making process of load fund investors. In the second essay, the timing of the decision to replace fund managers is examined. In the third essay, performance of actively managed mutual funds are separately examined during good and bad states of the market to test whether mutual funds perform differently under different market conditions.
Book Synopsis Dynamics of the Flow-Performance Relationship by : Lyubomir Serafimov
Download or read book Dynamics of the Flow-Performance Relationship written by Lyubomir Serafimov and published by . This book was released on 2019 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: We employ a dataset of Europe-wide-sold and US-sold equity mutual funds to investigate how flows of assets relate to past performance in the past decade and a half. We show that the flow-performance relationship changes in time and differs in Europe and US. We find that the typical for the US, before the 2000s, convex relationship was present in Europe during the period preceding the recent financial crisis. During the market turmoil of 2007-2009 market volatility played an important role and contributed to less convexity in Europe and to more concavity in the US. Although the effect of market volatility has largely subsided, after the crisis the shape of the relationship has remained as that observed during this volatile period on both sides of the Atlantic.
Book Synopsis Relationship Between Mutual Fund Flow and Fund Performance by : Jun Liu (S.M.)
Download or read book Relationship Between Mutual Fund Flow and Fund Performance written by Jun Liu (S.M.) and published by . This book was released on 2011 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Use publically available data set on Chinese stock oriented mutual funds, examine whether the fund flow within one period depends on the past performance of this individual fund, and if there's a relationship, then what the detailed linkage between the past performance and the current period fund flow is. Different models involving regression will be used to exam the significance of each factor that may contribute to the relationship. The results found by using Chinese market data will be compared to developed markets, for example, the U.S. market, see if similar patterns appear in both markets.
Book Synopsis Fund Flows and Asset Allocation Behavior of Mutual Fund Investors by : Bhutorn Sukwanitch
Download or read book Fund Flows and Asset Allocation Behavior of Mutual Fund Investors written by Bhutorn Sukwanitch and published by . This book was released on 2015 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the effect of the market and economic condition (e.g. the volatility of stock market, volatility of bond, CDS, Term spread) on the mutual fund flows and asset allocation behavior of Thais investors. The result indicates that there is a positive correlation between the excess flow of equity fund and the volatility of stock market but negative to the excess flow of fixed income funds. This study concludes that Thais investors tend to invest in equity funds more than fixed income funds when the stock market is highly volatility but allocate their asset away from equity funds when the economic condition is getting poor and the investor tend to invest more in growth stock funds when the market volatility is high. Finally, The result also shows that LTF/RMF investor and non-LTF/RMF investor have a different behavior, the behavior of LTF/RMF investor is influenced by the seasonality effect more than market or economic condition.
Book Synopsis The Flow-Performance Relationship Around the World by : Miguel A. Ferreira
Download or read book The Flow-Performance Relationship Around the World written by Miguel A. Ferreira and published by . This book was released on 2010 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use a new dataset to study how mutual fund flows depend on past performance across 28 countries. We find that flows are convex with past performance, creating an incentive for managers to take excessive risk. The flow-performance convexity is less pronounced in countries with higher levels of economic, financial, and mutual fund industry development. This is because mutual fund investors in developed countries are more sophisticated and face lower costs of participating in the mutual fund industry. Higher country-level convexity is positively associated with higher levels of risk taking by fund managers.
Book Synopsis An Empirical Analysis of the Dynamic Relationship between Mutual Fund Flow and Market Return Volatility by : Charles Cao
Download or read book An Empirical Analysis of the Dynamic Relationship between Mutual Fund Flow and Market Return Volatility written by Charles Cao and published by . This book was released on 2013 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the dynamic relation between aggregate mutual fund flow and market-wide volatility. Using daily flow data and a VAR approach, we find that market volatility is negatively related to concurrent and lagged flow. A structural VAR impulse response analysis suggests that shock in flow has a negative impact on market volatility: An inflow (outflow) shock predicts a decline (an increase) in volatility. From the perspective of volatility-flow relation, we find evidence of volatility timing for recent period of 1998-2003. Finally, we document a differential impact of daily inflow versus outflow on intraday volatility. The relation between intraday volatility and inflow (outflow) becomes weaker (stronger) from morning to afternoon.
Book Synopsis Flow-performance Relationship and Tournament Behavior in the Mutual Fund Industry by : Baoling Ma
Download or read book Flow-performance Relationship and Tournament Behavior in the Mutual Fund Industry written by Baoling Ma and published by . This book was released on 2008 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt: "In this paper, we interpret the flow-performance relationship as an incentive scheme implicitly given to mutual fund managers by mutual fund investors. We show that the flow-performance relationship varies not only with economic activity but also across fund attributes. We provide evidence that the degree of convexity of the flow-performance relationship has a positive effect on the magnitude of tournament behavior. Different from the conventional tournament hypothesis, we show that although the convexity of the flow-performance relationship does produce implicit incentives for fund managers to modify risk-taking behavior as a function of their prior performance, whether or not the mid-year losers increase the risk of their portfolios highly depends on the convexity degree of the flow-performance relationship."--Author's abstract.
