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The smart money effect in Germany – do investment focus and bank-affiliation matter?

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  • Kim J. Heyden
  • Florian Röder

Abstract

We investigate the smart money effect in the German mutual fund market from 2001 to 2016. Results show a positive relation between fund flows and subsequent performance for mutual funds with a European or international diversified investment focus. Funds that invest domestically, however, show no signs of a smart money effect. Moreover, evidence suggests that flows to funds managed by bank-affiliated investment companies are smart. We argue that less sophisticated investors rather invest domestically and that financial advice improves retail investors’ mutual fund investment decisions.

Suggested Citation

  • Kim J. Heyden & Florian Röder, 2020. "The smart money effect in Germany – do investment focus and bank-affiliation matter?," The European Journal of Finance, Taylor & Francis Journals, vol. 26(12), pages 1125-1145, August.
    • Handle: RePEc:taf:eurjfi:v:26:y:2020:i:12:p:1125-1145
    DOI: 10.1080/1351847X.2020.1720261
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    Cited by:

    1. Güner, Z. Nuray & Önder, Zeynep, 2022. "Bank affiliation and discounts on closed-end funds," International Review of Financial Analysis, Elsevier, vol. 83(C).
    2. Paulo Leite, 2024. "Performance and investment styles of international multi-asset funds during market crises," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(3), pages 783-805, August.

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