Purchase and redemption decisions of mutual fund investors and the role of fund families |
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Authors: | Stephan Jank Michael Wedow |
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Affiliation: | 1. Faculty of Economics and Social Sciences , University of Tübingen , Mohlstrase 36, D-72074 , Tübingen , Germany;2. Centre for Financial Research (CFR) , Cologne , Germany stephan.jank@uni-tuebingen.de;4. Department of Financial Stability , Deutsche Bundesbank , PO Box 10 06 02, D-60006 , Frankfurt , Germany |
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Abstract: | This paper investigates the purchases and redemptions of a large cross-sectional sample of German equity funds. We find that investors not only punish bad performance by selling their shares, but also have a tendency to sell winners. Investors in large fund families show higher sales and redemption rates. Furthermore, family size also affects the flow-performance relationship: investors in large families punish bad performance more. Last, we find that inner family rankings play an important part for redemptions, with investors strongly redeeming their shares from intra-family losers. This result provides a potential reconciliation to the apparent contradiction between the low average holding period of mutual fund investors and the lack of investor discipline. |
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Keywords: | mutual funds fund family flow-performance relationship |
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