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Smartphone Trading Technology, Investor Behavior, and Mutual Fund Performance

Author

Listed:
  • Xiao Cen

    (Mays Business School, Texas A&M University, College Station, Texas 77843)

Abstract

Using proprietary individual-level trading data around a natural experiment—the release of a smartphone trading app by a large investment advisor—this study investigates how smartphone trading technology affects retail investor behavior and mutual fund performance. App adoption by retail investors leads to an increase in investor attention and trading volume. App adopters’ flows become more sensitive to short-term fund returns and market sentiment, resulting in higher aggregate flow volume among adopters. The funds more exposed to the shock experience a greater decline in abnormal returns, likely attributable to higher fund flow volume and liquidity costs. As a result, both adopters and nonadopters experience a decline in their mutual fund investment returns.

Suggested Citation

  • Xiao Cen, 2024. "Smartphone Trading Technology, Investor Behavior, and Mutual Fund Performance," Management Science, INFORMS, vol. 70(10), pages 6897-6916, October.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:10:p:6897-6916
    DOI: 10.1287/mnsc.2021.02099
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