Costly Search and Mutual Fund Flows

This paper studies the flows of funds into and out of equity mutual funds. Consumers base their fund purchase decisions on prior performance information, but do so asymmetrically, investing disproportionately more in funds that performed very well the prior period. Search costs seem to be an important determinant of fund flows. High performance appears to be most salient for funds that exert higher marketing effort, as measured by higher fees. Flows are directly related to the size of the fund's complex as well as the current media attention received by the fund, which lower consumers' search costs.     

Truth in Mutual Fund Advertising: Evidence on Future Performance and Fund Flows

We examine a sample of 294 mutual funds that are advertised in Barron's or Money magazine. The preadvertisement performance of these funds is significantly higher than that of the benchmarks. We test whether the sponsors select funds to signal continued superior performance or they use the past superior performance to attract more money into the funds. Our analysis shows that there is no superior performance in the postadvertisement period. Thus, the results do not support the signaling hypothesis. On the other hand, we find that the advertised funds attract significantly more money in comparison with a group of control funds.     

The Effects of Advertising on Mutual Fund Flows: Results from a New Database

We examine 471,000 mutual fund company advertisements from 1997 to 2003 to study advertising's effect on fund inflows. We find advertising is generally ineffective in attracting inflows but was more effective during the bear market despite smaller advertising expenditures during this time. The top 10 advertisers in our sample were most successful in capturing inflows. These companies generated inflows with mutual fund ads; other companies succeeded when advertising their other products and their brand image. Within a fund family, advertising affects the flagship fund differently than the other funds. Sample firms appeared unable to choose correctly between print and TV ads.     

Dedicated REIT Mutual Fund Flows and REIT Performance

This study examines the effects of weekly and monthly capital flows into the dedicated REIT mutual fund sector on aggregate REIT returns and, simultaneously, the effects of industry-level REIT returns on subsequent REIT mutual fund flows. The dynamic relation between REIT capital flows and returns is estimated using vector autoregression (VAR) techniques. Unlike static regression techniques, our dynamic model produces estimates of the short-run relationships, long-run relationships, impulse response functions, and forecast variance decompositions. We find evidence that REIT mutual fund flows are positively and significantly related to prior returns, while prior REIT mutual fund flows do not significantly influence REIT returns. However, contemporaneous flows do appear to have an initial positive effect, which is partially reversed one period later. The positive contemporaneous effect, however, is the result of unexpected REIT mutual fund flows, while the expected portion is insignificant.     

Mutual Fund Flows and Cross‐Fund Learning within Families

We develop a model of performance evaluation and fund flows for mutual funds in a family. Family performance has two effects on a member fund's estimated skill and inflows: a positive common‐skill effect, and a negative correlated‐noise effect. The overall spillover can be either positive or negative, depending on the weight of common skill and correlation of noise in returns. Its absolute value increases with family size, and declines over time. The sensitivity of flows to a fund's own performance is affected accordingly. Empirical estimates of fund flow sensitivities show patterns consistent with rational cross‐fund learning within families.     

Mutual Fund Family Size and Mutual Fund Performance: The Role of Regulatory Changes

We examine whether the previously documented positive association between fund family size and fund performance is affected by significant regulatory changes (i.e., Regulation Fair Disclosure (Reg FD), the Global Settlement (GS), and increased scrutiny as a result of trading scandals) that have occurred in the last decade. Using Reg FD as a beginning point for these structural changes, we find that, while fund family size was positively associated with fund performance in the period prior to the regulatory changes, this advantage is significantly weaker in the period subsequent to the regulatory changes. Consistent with the weakened advantage of fund family size in fund performance, we find that the greater stock‐picking skill of larger fund families, measured using the earnings announcement returns of the stocks they trade, also weakened subsequent to the regulatory changes. Using narrower event windows around the regulatory changes, we find that the previously documented superior return of large fund families was partly attributable to selective disclosure. We also find that fund families implicated in the trading scandals experienced a decline in their performance during the scandal period. Finally, we examine the role of large investment banks in providing an advantage to large fund families. Family size was positively associated with the extent to which funds traded in the same direction as forecast revisions by analysts from large investment banks in the period prior to Reg FD and the GS and this association declined significantly after the two regulatory events.     

基金投资风格的持续性研究:原因与结果

本文以2006至2010年期间所有开放式股票型非指数型基金为样本,实证研究基金投资风格的持续性以及基金转变投资风格的原因和结果。研究发现:(1)基金的大盘/小盘风格具有一定的持续性,但是价值/成长风格不具有持续性;(2)基金总体上并没有表现出明显的风格择时能力,而过去的业绩是影响基金投资风格发现转变的一个重要原因;(3)适当地改变大盘/小盘风格、适当地保持价值/成长风格有利于提高未来的业绩。     

Geography,Informal Information Flows and Mutual Fund Portfolios

This paper explores how informal information channels impact mutual fund performance. We measure the strengths of two location‐based information channels: 1) information transfers among fund managers (fund‐fund links) and 2) transfers between managers and the companies in which they invest (fund‐company links). We find that each channel increases investment performance in the absence of the other, but decreases it when acting in combination. Stock selection associated with the presence of one channel, but the absence of the other, earns positive future returns. Our results indicate that the economic benefits of informal information channels depend critically on the nature of their interactions.     

Performance Chasing,Fund Flows and Fund Size in Real Estate Mutual Funds

Real estate mutual funds have grown dramatically in number, size, scope and assets under management over the last 15 years, but little assessment is evident. The present study addresses this limitation. Better prior period performance is associated with greater shares of fund inflows for a period. Returns, however, are negatively associated with increased fund flows and fund size. Investors chase past performance limiting fund managers’ ability to optimize investments. Under normal market conditions, but departing from typical mutual fund performance, real estate mutual fund returns generally exceed relevant benchmarks on a before expenses basis and match benchmark returns after expenses. The ability to meet and exceed benchmark returns, however, does not hold during the financial crisis period. Overall, more established funds are shown to have higher returns while fund turnover is not a determinant of returns.     

Mutual Fund Incentive Fees: Determinants and Effects

We investigate the how and why of performance fee provisions in a free contracting environment such as the Italian mutual fund market until 2006. We find weak support for the hypothesis that these provisions emerge as an economically efficient solution in a rational asset management industry plagued by asymmetric information. They appear to emerge mainly as the product of strategic pricing by asset managers wishing to ease market competition, leverage on investors' sentiment, and hedge their cost structure. Alternatively, fears that managers may opportunistically alter funds' investment policies to maximize the option value embedded in the incentive provisions appear unjustified.     

基金流量与基金投资行为——基于动态面板数据模型的实证研究

本文通过引入基金流量变量,对中国证券投资基金是否稳定市场这一争议性命题进行解析,挖掘中国基金经理投资行为"异质性"背后的基金申赎行为因素,试图从基金流量引发基金经理资产配置动态调整的视角对中国证券投资基金"是否行为理性"这一重要命题进行重新诠释。在实证过程中,本文构建动态面板模型对2006～2010年股票型开放式基金季度数据进行估计,检验结果表明我国证券投资基金投资行为受到基金流量的显著影响,基金持有人行为对基金经理投资行为具有冲击效应,并直接影响到基金经理的策略选择和资产组合调整。结合研究结论,本文提出推进中国版"401K"计划,优化基金持有人结构,合理引导基金投资者行为,减小基金异常申赎行为对市场波动性的传递效应等政策建议。     

基于VaR—GARCH的开放式基金投资风格研究

本文通过GARcH模型,得到了各个样本基金收益率序列的条件方差,进而根据条件方差求得各基金收益率序列的VaR值,通过分析VaR值得出各基金的风险偏好相似,因此得出我国开放式基金投资风格趋同的结论.     

Mutual Fund Managers’ Prior Work Experience and Their Investment Skill

This paper examines the relationship between mutual fund managers’ past professional backgrounds and their portfolio performance using Chinese mutual fund data from 2003 to 2016. We focus on managers with prior work experience either as industry analysts or as macroanalysts. We hypothesize that managers who worked as industry analysts exhibit superior stock picking skills, while managers with a background as macroanalysts time the market better. These hypotheses are supported by the data after controlling for observable fund and manager characteristics. Bootstrap analyses suggest that a significant difference in performance between these two types of managers cannot be attributed purely to luck.     

Running From a Bear: How Poor Stock Market Performance Affects the Determinants of Mutual Fund Flows

Abstract:  Using a proprietary data set to study how past performance affects the determinants of mutual fund flows for a sample of load fund investors, I provide evidence that the determinants of fund flow depend on market conditions for both redemptions and purchases. Specifically, I show that, for redemptions, relative performance and risk adjusted performance are important determinants during a period of record flows into mutual funds. Conversely, during a period of poor performance, absolute performance becomes much more important and relative performance and risk adjusted performance become less important. For purchases, absolute performance, risk adjusted performance, and most relative performance measures become more important during the bear market.     

Mutual Fund Performance: Measurement and Evidence1

The paper provides a critical review of empirical findings on the performance of mutual funds, mainly for the US and UK. Ex‐post, there are around 0‐5% of top performing UK and US equity mutual funds with truly positive‐alpha performance (after fees) and around 20% of funds that have truly poor alpha performance, with about 75% of active funds which are effectively zero‐alpha funds. Key drivers of relative performance are, load fees, expenses and turnover. There is little evidence of successful market timing. Evidence suggests past winner funds persist, when rebalancing is frequent (i.e., less than one year) and when using sophisticated sorting rules (e.g., Bayesian approaches) ‐ but transactions costs (load and advisory fees) imply that economic gains to investors from winner funds may be marginal. The US evidence clearly supports the view that past loser funds remain losers. Broadly speaking results for bond mutual funds are similar to those for equity funds. Sensible advice for most investors would be to hold low cost index funds and avoid holding past ‘active’ loser funds. Only sophisticated investors should pursue an active ex‐ante investment strategy of trying to pick winners ‐ and then with much caution.     

Mutual Fund Performance: An Empirical Decomposition into Stock-Picking Talent, Style, Transactions Costs, and Expenses

We use a new database to perform a comprehensive analysis of the mutual fund industry. We find that funds hold stocks that outperform the market by 1.3 percent per year, but their net returns underperform by one percent. Of the 2.3 percent difference between these results, 0.7 percent is due to the underperformance of nonstock holdings, whereas 1.6 percent is due to expenses and transactions costs. Thus, funds pick stocks well enough to cover their costs. Also, high-turnover funds beat the Vanguard Index 500 fund on a net return basis. Our evidence supports the value of active mutual fund management.     

Effects of Market Segmentation and Bank Concentration on Mutual Fund Expenses and Returns: Evidence from Finland

A tremendous amount of research examines US mutual funds, but fund markets also thrive in other countries. However, research about these fast growing markets is lacking. This study addresses Finnish funds. Fast growth of the Finnish fund industry, strong bank dominance in the industry and recent EU membership make it an interesting market to examine. The Finnish fund market is also of particular interest since it had the fastest growth among the EU countries during 1996–2000. We find evidence that bank‐managed and older funds charge higher expenses but investors are not compensated for paying higher expenses with higher risk‐adjusted returns, suggesting a potential agency problem. Overall, Finnish fund expenses have decreased over time, consistent with EU membership reducing market segmentation and generating competition.     

Good Stewards, Cheap Talkers, or Family Men? The Impact of Mutual Fund Closures on Fund Managers, Flows, Fees, and Performance

We examine a sample of 125 equity mutual funds that closed tonew investment between 1993 and 2004. We find that funds closefollowing a period of superior performance and abnormal fundinflows. Fund managers raise their fees when they close to compensatemanagers for losses in income due to the restrictions in sizeimposed by the fund closure decision. Managers reopen when fundsize declines. However, they do not earn superior returns afterreopening, suggesting that the fund closure decision does notprovide information about superior fund managers. (JEL G14,G23)     

Mutual Fund Herding and the Impact on Stock Prices

We analyze the trading activity of the mutual fund industry from 1975 through 1994 to determine whether funds "herd" when they trade stocks and to investigate the impact of herding on stock prices. Although we find little herding by mutual funds in the average stock, we find much higher levels in trades of small stocks and in trading by growth-oriented funds. Stocks that herds buy outperform stocks that they sell by 4 percent during the following six months; this return difference is much more pronounced among small stocks. Our results are consistent with mutual fund herding speeding the price-adjustment process.     

An Analysis of the Determinants and Shareholder Wealth Effects of Mutual Fund Mergers

This study examines the determinants of mutual fund mergers and their subsequent wealth impact on shareholders of target and acquiring funds. Results indicate significant improvements in postmerger performance and a reduction in expense ratios for target fund shareholders. In contrast, acquiring fund shareholders experience a significant deterioration in postmerger performance. The net asset flows continue to remain negative for the combined fund in the year following the merger. The likelihood of a fund merger is inversely related to fund size for both within- and across-family mutual fund mergers. However, poor past performance is a significant determinant for only within-family mergers.