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...

Existing literature documents a “smart money” effect in that investors have selection ability of mutual funds. Nevertheless, there remains a debate on whether such effect is simply the result of stock return momentum. Using monthly fund flows during the period of 1993 to 2010, we show that...

We study how mutual fund managers gain an edge in selecting stocks in an era of globalization. We use textual analysis to construct a new measure that captures a mutual fund's offshore exposure concentration through holding U.S. multinational firms. The proposed offshore concentration index...

We find that mutual funds holding a larger concentration of high gross profitability stocks generate better future performance. The outperformance of these funds is not driven by a profitability-related risk premium and is not a byproduct of fund managers' exploitation of other well-known...

We examine whether superior understanding of technological innovation is a source of mutual fund managers’ ability to garner positive abnormal returns. Consistent with our hypothesis, the inter-quintile annual net Carhart alpha spread for mutual funds sorted on changes in the technological...

We study whether mutual fund managers gain an edge through thematic investment strategies—investing in stocks that may benefit from a particular theme. We use textual analysis of 10-K filings to identify stocks exposed to different semantic themes and measure a mutual fund’s thematic...