The dynamics of short-term mutual fund flows and returns: A time-series and cross-sectional investigation
This study analyzes the dynamics of daily mutual fund flows. A Vector Auto Regression (VAR) of flows and returns shows that the behavior of fund investors is more consistent with contrarian rather than momentum characteristics. Past fund flows have a positive impact on future fund returns, with the long-term information effect dominating the transient price-pressure effect. Seasonality in daily flows, such as day-of-week and day-of-month patterns are present, and daily flows are generally mean-reverting. Probit regressions indicate that fund investment objective, marketing policy and level of active management explain cross-sectional variation in the behavioral patterns displayed in daily flows. Our results are robust to the different methods of calculating daily flows based on whether or not the day-end TNA figures include the current-day's flow. Throughout the analysis, we contrast the dynamics of daily flows with established results for monthly fund flows and find important differences between the two.
Year of publication: |
2009
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Authors: | Rakowski, David ; Wang, Xiaoxin |
Published in: |
Journal of Banking & Finance. - Elsevier, ISSN 0378-4266. - Vol. 33.2009, 11, p. 2102-2109
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Publisher: |
Elsevier |
Keywords: | Mutual funds Fund flows Investor behavior |
Saved in:
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