Mutual fund flows: Where does the money go?

Authors

  • Harlan Platt Northeastern University, Boston.
  • Licheng Cai Currensee Global Inc, Boston, MA.
  • Marjorie Platt Northeastern University, Boston, MA.

DOI:

https://doi.org/10.18533/jefs.v2i05.146

Keywords:

G110, G120, G140.

Abstract

We examine three broad mutual fund sectors: equities, fixed income, and money market funds, to ascertain whether fund flows explain investment returns or whether investment returns attract funds. This question has been studied before but for the most part, research results have not been intuitive. Our findings are substantially different from the results of previous studies. We believe that our results are intuitively more obvious. We fail to reject both causal hypotheses. That is, we find that investment returns are affected by funds flows and that funds flows towards high returns.

References

Investment company fact book: a review of trends and activities in the U.S. Investment Company industry, Investment Company Institute, 53rd Edition.

Bensen, K., Faff R., and Smith T., 2010. The simultaneous relation between fund flows and returns. Australian Journal of Management, 35(5): 51 – 67. http://dx.doi.org/10.1177/0312896209354217

Cashman G., Nardari F., Deli D., and Villupuram S., 2012. Investor Behavior in the Mutual Fund Industry: Evidence from Gross Flows. Journal of Economics and Finance, April. 1 – 23.

Ippolito, R., 1992. Consumer reaction to measures of poor quality: Evidence from the mutual fund industry. Journal of Law & Economics, XXXV: 45 -70. http://dx.doi.org/10.1086/467244

Norris, F., 2013. Younger households are slower to make gains in net worth. The New York Times, June 14, B3.

Remolona, E., Kleiman P., and Gruenstein, D., 1997. Market returns and mutual fund flows. FRBNY Economic Policy Review, 33 – 52.

Warther, V., 1995. Aggregate mutual fund flows and security returns. Journal of Financial Economics, 39: 209-235. http://dx.doi.org/10.1016/0304-405X(95)00827-2

Downloads

Published

2014-10-28

Issue

Vol. 2 No. 05 (2014): October

Section

Articles

License

Authors who publish with this journal agree to the following terms:

  • Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  • Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
  • Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) after official publication, as it can lead to productive exchanges as well as greater citation of published work (See The Effect of Open Access).