What drives the “Smart-Money” effect? Evidence from investors’ money flow to mutual fund classes
Author
Abstract
Suggested Citation
DOI: 10.1016/j.jempfin.2016.11.005
Download full text from publisher
As the access to this document is restricted, you may want to search for a different version of it.
References listed on IDEAS
- Blake, Christopher R & Elton, Edwin J & Gruber, Martin J, 1993. "The Performance of Bond Mutual Funds," The Journal of Business, University of Chicago Press, vol. 66(3), pages 370-403, July.
- Clifford, Christopher P. & Jordan, Bradford D. & Riley, Timothy B., 2014. "Average funds versus average dollars: Implications for mutual fund research," Journal of Empirical Finance, Elsevier, vol. 28(C), pages 249-260.
- Marcin Kacperczyk & Clemens Sialm & Lu Zheng, 2008.
"Unobserved Actions of Mutual Funds,"
The Review of Financial Studies, Society for Financial Studies, vol. 21(6), pages 2379-2416, November.
- Marcin Kacperczyk & Clemens Sialm & Lu Zheng, 2005. "Unobserved Actions of Mutual Funds," NBER Working Papers 11766, National Bureau of Economic Research, Inc.
- Diane Del Guercio & Jonathan Reuter, 2014.
"Mutual Fund Performance and the Incentive to Generate Alpha,"
Journal of Finance, American Finance Association, vol. 69(4), pages 1673-1704, August.
- Diane Del Guercio & Jonathan Reuter, 2011. "Mutual Fund Performance and the Incentive to Generate Alpha," NBER Working Papers 17491, National Bureau of Economic Research, Inc.
- Lu Zheng, 1999. "Is Money Smart? A Study of Mutual Fund Investors' Fund Selection Ability," Journal of Finance, American Finance Association, vol. 54(3), pages 901-933, June.
- Boney, Vaneesha & Comer, George & Kelly, Lynne, 2009. "Timing the investment grade securities market: Evidence from high quality bond funds," Journal of Empirical Finance, Elsevier, vol. 16(1), pages 55-69, January.
- Clemens Sialm & Laura T. Starks & Hanjiang Zhang, 2015.
"Defined Contribution Pension Plans: Sticky or Discerning Money?,"
Journal of Finance, American Finance Association, vol. 70(2), pages 805-838, April.
- Clemens Sialm & Laura Starks & Hanjiang Zhang, 2013. "Defined Contribution Pension Plans: Sticky or Discerning Money?," NBER Working Papers 19569, National Bureau of Economic Research, Inc.
- Clemens Sialm & Laura Starks & Hanjiang Zhang, 2014. "Defined Contribution Pension Plans: Sticky or Discerning Money?," Discussion Papers 13-022, Stanford Institute for Economic Policy Research.
- repec:bla:jfinan:v:59:y:2004:i:6:p:2605-2622 is not listed on IDEAS
- Akbas, Ferhat & Armstrong, Will J. & Sorescu, Sorin & Subrahmanyam, Avanidhar, 2015. "Smart money, dumb money, and capital market anomalies," Journal of Financial Economics, Elsevier, vol. 118(2), pages 355-382.
- K. J. Martijn Cremers & Antti Petajisto, 2009. "How Active Is Your Fund Manager? A New Measure That Predicts Performance," The Review of Financial Studies, Society for Financial Studies, vol. 22(9), pages 3329-3365, September.
- Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
- Chevalier, Judith & Ellison, Glenn, 1997.
"Risk Taking by Mutual Funds as a Response to Incentives,"
Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1167-1200, December.
- Judith A. Chevalier & Glenn D. Ellison, 1995. "Risk Taking by Mutual Funds as a Response to Incentives," NBER Working Papers 5234, National Bureau of Economic Research, Inc.
- Chevalier, J. & Ellison, G., 1996. "Risk Taking by Mutual Funds as a Response to Incentives," Working papers 96-3, Massachusetts Institute of Technology (MIT), Department of Economics.
- Jennifer Huang & Clemens Sialm & Hanjiang Zhang, 2011.
"Risk Shifting and Mutual Fund Performance,"
The Review of Financial Studies, Society for Financial Studies, vol. 24(8), pages 2575-2616.
- Jennifer Huang & Clemens Sialm & Hanjiang Zhang, 2009. "Risk Shifting and Mutual Fund Performance," NBER Working Papers 14903, National Bureau of Economic Research, Inc.
- repec:bla:jfinan:v:53:y:1998:i:5:p:1589-1622 is not listed on IDEAS
- Martijn Cremers & Antti Petajisto, 2006. "How Active is Your Fund Manager? A New Measure That Predicts Performance," Yale School of Management Working Papers amz2370, Yale School of Management, revised 01 May 2009.
- Richard B. Evans, 2010. "Mutual Fund Incubation," Journal of Finance, American Finance Association, vol. 65(4), pages 1581-1611, August.
- Richard B. Evans & Rüdiger Fahlenbrach, 2012.
"Institutional Investors and Mutual Fund Governance: Evidence from Retail--Institutional Fund Twins,"
The Review of Financial Studies, Society for Financial Studies, vol. 25(12), pages 3530-3571.
- Richard B. EVANS & Rüdiger FAHLENBRACH, 2011. "Institutional Investors and Mutual Fund Governance: Evidence from Retail – Institutional Fund Twins," Swiss Finance Institute Research Paper Series 11-31, Swiss Finance Institute.
- Friesen, Geoffrey C. & Sapp, Travis R.A., 2007. "Mutual fund flows and investor returns: An empirical examination of fund investor timing ability," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2796-2816, September.
- Coval, Joshua & Stafford, Erik, 2007.
"Asset fire sales (and purchases) in equity markets,"
Journal of Financial Economics, Elsevier, vol. 86(2), pages 479-512, November.
- Joshua D. Coval & Erik Stafford, 2005. "Asset Fire Sales (and Purchases) in Equity Markets," NBER Working Papers 11357, National Bureau of Economic Research, Inc.
- repec:bla:jfinan:v:53:y:1998:i:5:p:1775-1798 is not listed on IDEAS
- Guercio, Diane Del & Tkac, Paula A., 2002. "The Determinants of the Flow of Funds of Managed Portfolios: Mutual Funds vs. Pension Funds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 37(4), pages 523-557, December.
- Dong Lou, 2012. "A Flow-Based Explanation for Return Predictability," The Review of Financial Studies, Society for Financial Studies, vol. 25(12), pages 3457-3489.
- Daniel Bergstresser & John M. R. Chalmers & Peter Tufano, 2009. "Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry," The Review of Financial Studies, Society for Financial Studies, vol. 22(10), pages 4129-4156, October.
- Ayadi, Mohamed A. & Kryzanowski, Lawrence, 2011. "Fixed-income fund performance: Role of luck and ability in tail membership," Journal of Empirical Finance, Elsevier, vol. 18(3), pages 379-392, June.
- Aneel Keswani & David Stolin, 2008. "Which Money Is Smart? Mutual Fund Buys and Sells of Individual and Institutional Investors," Journal of Finance, American Finance Association, vol. 63(1), pages 85-118, February.
- Clemens Sialm & Laura Starks & Hanjiang Zhang, 2015. "Defined Contribution Pension Plans: Mutual Fund Asset Allocation Changes," American Economic Review, American Economic Association, vol. 105(5), pages 432-436, May.
- Joseph Chen & Harrison Hong & Ming Huang & Jeffrey D. Kubik, 2004. "Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization," American Economic Review, American Economic Association, vol. 94(5), pages 1276-1302, December.
- Berk, Jonathan B. & van Binsbergen, Jules H., 2015.
"Measuring skill in the mutual fund industry,"
Journal of Financial Economics, Elsevier, vol. 118(1), pages 1-20.
- Berk, Jonathan B. & van Binsbergen, Jules H., 2014. "Measuring Skill in the Mutual Fund Industry," Research Papers 3131, Stanford University, Graduate School of Business.
- Susan E. K. Christoffersen & Richard Evans & David K. Musto, 2013. "What Do Consumers’ Fund Flows Maximize? Evidence from Their Brokers’ Incentives," Journal of Finance, American Finance Association, vol. 68(1), pages 201-235, February.
- Edwin J. Elton & Martin J. Gruber & Christopher R. Blake, 2001. "A First Look at the Accuracy of the CRSP Mutual Fund Database and a Comparison of the CRSP and Morningstar Mutual Fund Databases," Journal of Finance, American Finance Association, vol. 56(6), pages 2415-2430, December.
- Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
- Chen, Xuanjuan & Yao, Tong & Yu, Tong, 2007. "Prudent man or agency problem? On the performance of insurance mutual funds," Journal of Financial Intermediation, Elsevier, vol. 16(2), pages 175-203, April.
- Cici, Gjergji & Gibson, Scott, 2012. "The Performance of Corporate Bond Mutual Funds: Evidence Based on Security-Level Holdings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 47(1), pages 159-178, February.
- James, Christopher & Karceski, Jason, 2006. "Investor monitoring and differences in mutual fund performance," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2787-2808, October.
- Clemens Sialm & Laura Starks, 2012.
"Mutual Fund Tax Clienteles,"
Journal of Finance, American Finance Association, vol. 67(4), pages 1397-1422, August.
- Clemens Sialm & Laura Starks, 2009. "Mutual Fund Tax Clienteles," NBER Working Papers 15327, National Bureau of Economic Research, Inc.
- Cremers, Martijn & Petajisto, Antti & Zitzewitz, Eric, 2013.
"Should Benchmark Indices Have Alpha? Revisiting Performance Evaluation,"
Critical Finance Review, now publishers, vol. 2(1), pages 1-48, July.
- Martijn Cremers & Antti Petajisto & Eric Zitzewitz, 2012. "Should Benchmark Indices Have Alpha? Revisiting Performance Evaluation," NBER Working Papers 18050, National Bureau of Economic Research, Inc.
- Bailey, Warren & Kumar, Alok & Ng, David, 2011. "Behavioral biases of mutual fund investors," Journal of Financial Economics, Elsevier, vol. 102(1), pages 1-27, October.
- Elton, Edwin J & Gruber, Martin J & Blake, Christopher R, 1996. "The Persistence of Risk-Adjusted Mutual Fund Performance," The Journal of Business, University of Chicago Press, vol. 69(2), pages 133-157, April.
- Nanda, Vikram K. & Wang, Z. Jay & Zheng, Lu, 2009. "The ABCs of mutual funds: On the introduction of multiple share classes," Journal of Financial Intermediation, Elsevier, vol. 18(3), pages 329-361, July.
Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
Cited by:
- H. Pierre Hsieh & Imen Tebourbi & Wen‐Min Lu & Nai‐Yu Liu, 2020. "Mutual fund performance: The decision quality and capital magnet efficiencies," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 861-872, July.
- Xuejun Jin & Yifan Shen & Bin Yu & Meifen Qian, 2022. "Flow‐driven risk shifting of high‐performing funds," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 71-100, March.
- Murat Yaş & Ahmet Faruk Aysan & Mohamed Eskandar Shah Mohd Rasid, 2022. "Are religious investors financially smart? evidence from equity funds," Journal of Asset Management, Palgrave Macmillan, vol. 23(1), pages 33-45, February.
- Elizabeth Nedumparambil & Anup Kumar Bhandari, 2022. "Risk factors, uncertainty, and investment decision: evidence from mutual fund flows from India," Indian Economic Review, Springer, vol. 57(2), pages 349-372, December.
- Yamani, Ehab, 2023. "The informational role of fund flow in the profitable predictability of mutual funds," Finance Research Letters, Elsevier, vol. 51(C).
- Jiang, George J. & Zaynutdinova, Gulnara R. & Zhang, Huacheng, 2021. "Stock-selection timing," Journal of Banking & Finance, Elsevier, vol. 125(C).
- Rakowski, David & Yamani, Ehab, 2021. "Endogeneity in the mutual fund flow–performance relationship: An instrumental variables solution," Journal of Empirical Finance, Elsevier, vol. 64(C), pages 247-271.
- Darby, Julia & Zhang, Hai & Zhang, Jinkai, 2021.
"Institutional trading in volatile markets: Evidence from Chinese stock markets,"
Pacific-Basin Finance Journal, Elsevier, vol. 65(C).
- Julia Darby & Hai Zhang & Jinkai Zhang, 2019. "Institutional trading in volatile markets: evidence from Chinese stock markets," Working Papers 1912, University of Strathclyde Business School, Department of Economics.
- Juan Carlos Matallín-Sáez & Amparo Soler-Domínguez & Diego Víctor Mingo-López, 2021. "On management risk and price in the mutual fund industry: style and performance distribution analysis," Risk Management, Palgrave Macmillan, vol. 23(1), pages 150-171, June.
- Yousefi, Hamed & Najand, Mohammad, 2022. "Geographical diversification using ETFs: Multinational evidence from COVID-19 pandemic," International Review of Financial Analysis, Elsevier, vol. 83(C).
- Magni, Carlo Alberto & Marchioni, Andrea & Baschieri, Davide, 2023. "The Attribution Matrix and the joint use of Finite Change Sensitivity Index and Residual Income for value-based performance measurement," European Journal of Operational Research, Elsevier, vol. 306(2), pages 872-892.
- Klinkowska, Olga & Zhao, Yuan, 2023. "Fund flows and performance: New evidence from retail and institutional SRI mutual funds," International Review of Financial Analysis, Elsevier, vol. 87(C).
- Hung, Pi-Hsia & Lien, Donald & Kuo, Ming-Sin, 2020. "Window dressing in equity mutual funds," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 338-354.
- Dang, Thuy Duong & Hollstein, Fabian & Prokopczuk, Marcel, 2022. "How do corporate bond investors measure performance? Evidence from mutual fund flows," Journal of Banking & Finance, Elsevier, vol. 142(C).
- Hong, Xin & Kang, Di & Wang, Zhibin, 2021. "Do mutual funds lose talent to hedge funds? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 679-689.
Most related items
These are the items that most often cite the same works as this one and are cited by the same works as this one.- Yong Chen & Nan Qin, 2017. "The Behavior of Investor Flows in Corporate Bond Mutual Funds," Management Science, INFORMS, vol. 63(5), pages 1365-1384, May.
- Clemens Sialm & T. Mandy Tham, 2016.
"Spillover Effects in Mutual Fund Companies,"
Management Science, INFORMS, vol. 62(5), pages 1472-1486, May.
- Clemens Sialm & T. Mandy Tham, 2011. "Spillover Effects in Mutual Fund Companies," NBER Working Papers 17292, National Bureau of Economic Research, Inc.
- Jennifer Huang & Kelsey D. Wei & Hong Yan, 2022. "Investor learning and mutual fund flows," Financial Management, Financial Management Association International, vol. 51(3), pages 739-765, September.
- Li, Zhiyong & Rao, Xiao, 2023. "Exploring the zoo of predictors for mutual fund performance in China," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
- Cuthbertson, Keith & Nitzsche, Dirk & O'Sullivan, Niall, 2016. "A review of behavioural and management effects in mutual fund performance," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 162-176.
- Rakowski, David & Yamani, Ehab, 2021. "Endogeneity in the mutual fund flow–performance relationship: An instrumental variables solution," Journal of Empirical Finance, Elsevier, vol. 64(C), pages 247-271.
- Diane Del Guercio & Jonathan Reuter, 2014.
"Mutual Fund Performance and the Incentive to Generate Alpha,"
Journal of Finance, American Finance Association, vol. 69(4), pages 1673-1704, August.
- Diane Del Guercio & Jonathan Reuter, 2011. "Mutual Fund Performance and the Incentive to Generate Alpha," NBER Working Papers 17491, National Bureau of Economic Research, Inc.
- Massa, Massimo & Cheng, Si & Zhang, Hong, 2021. "Tax Evasion and Market Efficiency: Evidence from the FATCA and Offshore Mutual Funds," CEPR Discussion Papers 15747, C.E.P.R. Discussion Papers.
- Sorhage, Christoph, 2015. "Outsourcing of mutual funds' non-core competencies," CFR Working Papers 14-04 [rev.2], University of Cologne, Centre for Financial Research (CFR).
- Xi Dong & Shu Feng & Ronnie Sadka, 2019. "Liquidity Risk and Mutual Fund Performance," Management Science, INFORMS, vol. 65(3), pages 1020-1041, March.
- Khaled Obaid & Kuntara Pukthuanthong, 2021. "Informativeness of mutual fund advertisements: Does advertising communicate fund quality to investors?," Financial Management, Financial Management Association International, vol. 50(1), pages 203-236, March.
- Martin Rohleder & Dominik Schulte & Marco Wilkens, 2017. "Management of flow risk in mutual funds," Review of Quantitative Finance and Accounting, Springer, vol. 48(1), pages 31-56, January.
- Clemens Sialm & Laura T. Starks & Hanjiang Zhang, 2015.
"Defined Contribution Pension Plans: Sticky or Discerning Money?,"
Journal of Finance, American Finance Association, vol. 70(2), pages 805-838, April.
- Clemens Sialm & Laura Starks & Hanjiang Zhang, 2013. "Defined Contribution Pension Plans: Sticky or Discerning Money?," NBER Working Papers 19569, National Bureau of Economic Research, Inc.
- Clemens Sialm & Laura Starks & Hanjiang Zhang, 2014. "Defined Contribution Pension Plans: Sticky or Discerning Money?," Discussion Papers 13-022, Stanford Institute for Economic Policy Research.
- Fulkerson, Jon A. & Riley, Timothy B., 2019. "Portfolio concentration and mutual fund performance," Journal of Empirical Finance, Elsevier, vol. 51(C), pages 1-16.
- Moneta, Fabio, 2015. "Measuring bond mutual fund performance with portfolio characteristics," Journal of Empirical Finance, Elsevier, vol. 33(C), pages 223-242.
- Yang Sun, 2021. "Index Fund Entry and Financial Product Market Competition," Management Science, INFORMS, vol. 67(1), pages 500-523, January.
- Christiansen, Charlotte & Grønborg, Niels S. & Nielsen, Ole L., 2020.
"Mutual fund selection for realistically short samples,"
Journal of Empirical Finance, Elsevier, vol. 55(C), pages 218-240.
- Charlotte Christiansen & Niels S. Grønborg & Ole L. Nielsen, 2018. "Mutual Fund Selection for Realistically Short Samples," CREATES Research Papers 2018-36, Department of Economics and Business Economics, Aarhus University.
- Clemens Sialm & Hanjiang Zhang, 2020.
"Tax‐Efficient Asset Management: Evidence from Equity Mutual Funds,"
Journal of Finance, American Finance Association, vol. 75(2), pages 735-777, April.
- Clemens Sialm & Hanjiang Zhang, 2015. "Tax-Efficient Asset Management: Evidence from Equity Mutual Funds," NBER Working Papers 21060, National Bureau of Economic Research, Inc.
- Brown, Stephen J. & Sotes-Paladino, Juan & Wang, Jiaguo(George) & Yao, Yaqiong, 2017. "Starting on the wrong foot: Seasonality in mutual fund performance," Journal of Banking & Finance, Elsevier, vol. 82(C), pages 133-150.
- Dariusz Filip, 2021. "A Review of Main Strands on the Flow-Performance Relationship of Mutual Funds," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 7(3), pages 245-256, July.
More about this item
Keywords
Fund flows; Smart-money effect; Persistent-flow explanation; Institutional funds; Retail funds; Fund classes;All these keywords.
JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
Statistics
Access and download statisticsCorrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:empfin:v:40:y:2017:i:c:p:39-58. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jempfin .
Please note that corrections may take a couple of weeks to filter through the various RePEc services.