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Bank affiliation and lottery-like characteristics of mutual funds

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  • Wang, Xiaoxiao

Abstract

This study investigates the impact of commercial bank affiliation on mutual funds' lottery-like characteristics. Existing literature has extensively explored the benefits or costs of commercial bank affiliation in the asset management industry. Using a sample of Chinese mutual funds between 2003 and 2019, we reveal that bank affiliation significantly decreases these characteristics, and this phenomenon exhibits better performance. Our evidence suggests that affiliated funds benefit from information advantages. Notably, affiliated funds attract cash inflows by enhancing their performance rather than catering to investors’ lottery preferences. These results emphasize the role of gambling behavior in the mutual fund industry by focusing on the significance of ownership, in this case, by commercial banks.

Suggested Citation

  • Wang, Xiaoxiao, 2024. "Bank affiliation and lottery-like characteristics of mutual funds," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 944-963.
    • Handle: RePEc:eee:reveco:v:93:y:2024:i:pb:p:944-963
    DOI: 10.1016/j.iref.2024.05.041
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    More about this item

    Keywords

    Commercial bank affiliation; Mutual funds; Skewness; Idiosyncratic skewness; Lottery-like characteristics; Investor flows;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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