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Mutual Fund Flows And Investor Sentiment
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Book Synopsis Mutual Fund Flows and Investor Sentiment by : Egle Karmaziene
Download or read book Mutual Fund Flows and Investor Sentiment written by Egle Karmaziene and published by . This book was released on 2016 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: I show that the shape of flow-performance relationship among open-end funds varies with investor sentiment. This link is stronger when the market tone is optimistic. Cross-sectional comparison reveals that the convexity of the relationship is more pronounced among funds of the type that receives less demand; especially among risky funds in low-investor-sentiment quarters. Managers of such funds that are under-performing have incentives to increase the risk of their portfolios; they do this by betting more on the market index and buying larger stocks in low-sentiment quarters. Applying Baker and Wurgler's (2006) findings suggests that this strategy is sub-optimal.
Book Synopsis Measuring Investor Sentiment with Mutual Fund Flows by : Azi Ben-Rephael
Download or read book Measuring Investor Sentiment with Mutual Fund Flows written by Azi Ben-Rephael and published by . This book was released on 2011 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate a proxy for monthly shifts between bond funds and equity funds in the USA: aggregate net exchanges of equity funds. This measure (which is negatively related to changes in VIX) is positively contemporaneously correlated with aggregate stock market excess returns: One standard deviation of net exchanges is related to 1.95% of market excess return. Our main new finding is that 85% (all) of the contemporaneous relation is reversed within four (ten) months. The effect is stronger in smaller stocks and in growth stocks. These findings support the notion of quot;noisequot; in aggregate market prices induced by investor sentiment.
Book Synopsis Investor Sentiment in Japanese and U.S. Daily Mutual Fund Flows by : Stephen J. Brown
Download or read book Investor Sentiment in Japanese and U.S. Daily Mutual Fund Flows written by Stephen J. Brown and published by . This book was released on 2003 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We find evidence that is consistent with the hypothesis that daily mutual fund flows may be instruments for investor sentiment about the stock market. We use this finding to construct a new index of investor sentiment, and validate this index using data from both the United States and Japan. In both markets exposure to this factor is priced, and in the Japanese case, we document evidence of negative correlations between Bull' and Bear' domestic funds. The flows to bear foreign funds in Japan display some evidence of negative correlation to domestic and foreign equity funds, suggesting that there is a foreign vs. domestic sentiment factor in Japan that does not appear in the contemporaneous U.S. data. By contrast, U.S. mutual fund investors appear to regard domestic and foreign equity mutual funds as economic substitutes.
Book Synopsis Investor Sentiment in Japanese and U.S. Daily Mutual Fund Flows by :
Download or read book Investor Sentiment in Japanese and U.S. Daily Mutual Fund Flows written by and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Does Mutual Fund Flow Reflect Investor Sentiment? by : Daniel Indro
Download or read book Does Mutual Fund Flow Reflect Investor Sentiment? written by Daniel Indro and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relationship between net aggregate equity fund flow and investor sentiment using weekly flow data. Using sentiment indicators from the American Association of Individual Investors and Investors Intelligence, I find that net aggregate equity fund flow in the current week is higher when individual investors became more bullish in the previous and current weeks. Moreover, higher net aggregate equity fund flow in the current week induces newsletter writers to become more bullish in the subsequent week. The relationship between net aggregate equity fund flow and investor sentiment remains strong even after accounting for the effects of risk premium and inflation. Overall, the evidence suggests that the behavior of equity fund investors is influenced not only by economic fundamentals, but also by investor sentiment.
Book Synopsis Sentimental Mutual Fund Flows by : George J. Jiang
Download or read book Sentimental Mutual Fund Flows written by George J. Jiang and published by . This book was released on 2019 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that many stylized empirical patterns for mutual fund flows are driven by investor sentiment. Specifically, when sentiment is high, investors exhibit a stronger tendency of chasing past fund performance; fund flows are less sensitive to fund expenses; and investors are attracted more to funds with sheer visibility. Moreover, the well-documented positive relation between fund flows and future fund performance is significant only during high sentiment periods and is mainly driven by expected component of fund flows. Finally, we show that mutual fund investors exhibit a significantly negative timing ability at the individual fund level when sentiment is high.
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.
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.
Book Synopsis Two Essays on Investor Sentiment and Equity Offerings by :
Download or read book Two Essays on Investor Sentiment and Equity Offerings written by and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using monthly open-end mutual fund flows as a proxy for investor sentiment, I am able to examine the impact of sentiment on IPO volume and underpricing. I find that issuers' filing decisions are significantly affected by the predicted future sentiment around the expected IPO dates. Furthermore, sentiment has an impact on the final offer price setting and over-allotment options exercised. While previous research documents IPO cycles with respect to other proxies for investor sentiment, I am able to examine IPO cycles and underpricing with respect to sentiment along with investor risk preferences. I hypothesize that a going public firm will try to issue its IPO when investor risk preferences are favorable to the firm's own risk characteristics. Empirical results based on 5,661 initial public offerings between 1986 and 2004 are consistent with my hypotheses that issuers not only time the market with sentiment in general, but also attempt to incorporate investor risk preferences into their going public decisions. Furthermore, underpricing is more severe when firms issue equity during months with large inflows into equity mutual funds. In my second essay, I find that SEO firms appear to time market efficiently because of the shorter filing periods compared to the average 2-3 months of the IPOs. Also, sentiment not only affects a SEO offer price setting but also affects the over-allotment options exercised. I examine two subgroups of the SEO samples: shelf registration and non-shelf SEOs. I find that shelf-registered SEOs incorporate investor sentiment into offering price to a greater degree compared to regular SEOs. Lastly I find that investor risk preference plays a role in firms' decision to file prospectuses with the SEC. In other words, firms rationally decide the timing of filing based on the predicted investor preference and try to match firm characteristics with investor preference around the expected SEO date.
Book Synopsis On Market Timing and Investment Performance Part I by : Robert C Merton
Download or read book On Market Timing and Investment Performance Part I written by Robert C Merton and published by Legare Street Press. This book was released on 2022-10-27 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work is in the "public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.
Book Synopsis The Asymmetric Effects of Investor Sentiment by : Chandler Lutz
Download or read book The Asymmetric Effects of Investor Sentiment written by Chandler Lutz and published by . This book was released on 2016 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use the returns on lottery-like stocks to construct a novel index for investor sentiment in the stock market. This new measure is closely related to previously developed sentiment indicators, but more accurately tracks speculative episodes over the sample period. Using our index, we find that the relationship between sentiment and returns is asymmetric: during bear markets, high sentiment predicts low future returns for the cross-section of speculative stocks and the market overall while the relationship during bull markets is weak and often insignificant. Thus, the results suggest that sophisticated investors only act as corrective force during certain time periods. We also show that our index predicts implied volatility, media pessimism, and mutual fund flows. Overall, our findings are consistent with both the theories and anecdotal accounts of investor sentiment in the stock market.
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.
Book Synopsis Media Sentiment and International Asset Prices by : Samuel P. Fraiberger
Download or read book Media Sentiment and International Asset Prices written by Samuel P. Fraiberger and published by International Monetary Fund. This book was released on 2018-12-10 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We assess the impact of media sentiment on international equity prices using more than 4.5 million Reuters articles published across the globe between 1991 and 2015. News sentiment robustly predicts daily returns in both advanced and emerging markets, even after controlling for known determinants of stock prices. But not all news-sentiment is alike. A local (country-specific) increase in news optimism (pessimism) predicts a small and transitory increase (decrease) in local returns. By contrast, changes in global news sentiment have a larger impact on equity returns around the world, which does not reverse in the short run. We also find evidence that news sentiment affects mainly foreign – rather than local – investors: although local news optimism attracts international equity flows for a few days, global news optimism generates a permanent foreign equity inflow. Our results confirm the value of media content in capturing investor sentiment.
Book Synopsis The Implications of Investor Behaviour to Financial Markets by : Lisa Desiree Majmin
Download or read book The Implications of Investor Behaviour to Financial Markets written by Lisa Desiree Majmin and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial markets are subject to sentiment from within and beyond their nation's borders. Fund flows either flood markets with liquidity, or drain them to the point of asset fire sales. This typically occurs in accordance with investors' beliefs and risk preferences and ultimately renders markets unstable. This thesis serves to establish the implications of investor behaviour to financial markets. Chapter 2 proposes macro sentiment as a leading indicator for financial instability within the Early Warning Framework of Borio & Lowe (2002). This signalling method identifies imbalances within the financial system. Key indicators include real equity and property prices, and private credit. Macro sentiment is then shown to display excess pessimism prior to systemic crises and therefore, is a relevant leading indicator. US institutional investor sentiment is measured through the demand for portfolio insurance in Chapter 3. Shefrin (1999) advocates index option markets as the manifestation of institutional investor sentiment. A decrease in index option skewness is associated with bearish sentiment. This chapter applies a non-parametric method to extract the risk-neutral distribution to gauge sentiment based on the 30-day probability of the underlying reaching the at-the-money futures level, and the third moment. These measures are examined in relation to the VIX, the put-call ratio, the slope of the implied volatility function and the Bakshi, Kapadia & Madan (2003) skew. Chapter 4 proposes a theory of sentiment propagation and examines the link between global and investor sentiment within the US. An extensive literature review of mutual fund flows and sentiment within the broad context of the macroeconomy affirms the use of cross-border fund flows as the channel through which sentiment propagates. The empirical section then establishes congruency between global sentiment, as measured by dedicated USA equity and bond fund flows of US and non-US domiciled investors and sentiment within the US.
Book Synopsis A Model of the Discounts on Closed-end Mutual Funds, the Quantification Fo Investor Sentiment, and the Inability of Arbitrage to Force Closed-end Fund Share Prices to Par by : Sean Masaki Flynn
Download or read book A Model of the Discounts on Closed-end Mutual Funds, the Quantification Fo Investor Sentiment, and the Inability of Arbitrage to Force Closed-end Fund Share Prices to Par written by Sean Masaki Flynn and published by . This book was released on 2002 with total page 416 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Does Taiwan Stock Market Walk with Investor Sentiment? by :
Download or read book Does Taiwan Stock Market Walk with Investor Sentiment? written by and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Which Factors Matter to Investors? Evidence from Mutual Fund Flows by : Brad M. Barber
Download or read book Which Factors Matter to Investors? Evidence from Mutual Fund Flows written by Brad M. Barber and published by . This book was released on 2016 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: When assessing a fund manager's skill, sophisticated investors will consider all factors (priced and unpriced) that explain cross-sectional variation in fund performance. We investigate which factors investors attend to by analyzing mutual fund flows as a function of recent returns decomposed into alpha and factor-related returns. Surprisingly, investors attend most to market risk (beta) when evaluating funds and treat returns attributable to size, value, momentum, and industry factors as alpha. Using proxies for investor sophistication (wealth, distribution channels, and periods of high investor sentiment), we find that more sophisticated investors use more sophisticated benchmarks when evaluating fund performance.
