IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v62y2019icp160-179.html
   My bibliography  Save this article

The ‘smart money effect’ among socially responsible mutual fund investors

Author

Listed:
  • Muñoz, Fernando

Abstract

In this paper, I study investors' selection skills for a broad (576 funds) and updated (January 2004 to May 2018) sample of socially responsible (SR) mutual funds in the US market. In general terms, I obtain a positive relationship between fund flows and subsequent financial performance. This positive relationship is conducted by the bad financial performance of funds suffering net outflows, and it is stronger for non-institutional funds and for funds with a low minimum investment. In addition, I find in general terms that fund flows in US SR funds are persistent, and they are positively related to lagged returns. All these results together seem to indicate that this positive relationship is not driven by investors’ selection skills. Moreover, I observe that religious fund investors are minimally influenced by lagged returns and show the worst selection skills in the US SR fund market. Furthermore, environmental fund investors present the strongest positive relationship between flows and subsequent financial performance, and the flows for these funds are not persistent. When analysing other SR fund markets, I observe in general terms a lack of relationship between fund flows and subsequent financial performance.

Suggested Citation

  • Muñoz, Fernando, 2019. "The ‘smart money effect’ among socially responsible mutual fund investors," International Review of Economics & Finance, Elsevier, vol. 62(C), pages 160-179.
    • Handle: RePEc:eee:reveco:v:62:y:2019:i:c:p:160-179
    DOI: 10.1016/j.iref.2019.03.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1059056018301163
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.iref.2019.03.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    SR mutual funds; Smart money effect; Green funds; Religious funds; Investors' sophistication level; Mutual fund characteristics;
    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
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    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:reveco:v:62:y:2019:i:c:p:160-179. 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.

    We have no bibliographic references for this item. You can help adding them by using 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/inca/620165 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.