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Far tail or extreme day returns, mutual fund cash flows and investment behaviour

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  • David Burnie
  • Adri De Ridder

Abstract

This study examines the frequency of extreme trading days and investment behaviour in Sweden. We show that the frequency, as well as the magnitude of extreme trading days has increased over time. We also show that the frequency of extreme trading days in a year is positively correlated to the frequency the preceding year and that this behaviour has persisted from 1940 to 2006. Furthermore, we show that aggregate cash flows into equity and bond funds are unrelated to risk measured by SD of return. Our findings show that investors, individuals as well as corporations, use simple passive investment strategies and hence do not believe in market timing or wish to risk capital on capturing far tail or black swan-type returns.

Suggested Citation

  • David Burnie & Adri De Ridder, 2010. "Far tail or extreme day returns, mutual fund cash flows and investment behaviour," Applied Financial Economics, Taylor & Francis Journals, vol. 20(16), pages 1241-1256.
    • Handle: RePEc:taf:apfiec:v:20:y:2010:i:16:p:1241-1256
    DOI: 10.1080/09603107.2010.489885
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    Cited by:

    1. Ahmed Naeem & Sarfraz Mudassira, 2018. "Stock Market Volatility Measure Using Non-Traditional Tool Case of Germany," Economics and Business, Sciendo, vol. 32(1), pages 126-135, July.
    2. Vasiliki Chatzikonstanti & Michail Karoglou, 2022. "Can black swans be tamed with a flexible mean‐variance specification?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3202-3227, July.
    3. Wenqing Zhang & Prasad Padmanabhan & Chia-Hsing Huang, 2015. "Sequential capital investment decision making under extreme cash fl ow situations: evidence using Monte Carlo simulation," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 16(5), pages 877-900, October.

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