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A Closer Examination of Mutual Fund Flows and Performance

2004; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.499606

1556-5068

Steve Birnbaum, Jarl G. Kallberg, Nicholas Koutsoftas, Keith Schwartz,

Banking stability, regulation, efficiency

This study analyzes the reaction of mutual fund investors to past fund performance. We analyze separately institutional and retail funds as well as funds with different investment objectives. Based on data on domestic equity funds from 1994 to 2003, we show that the reaction is more linear than observed in previous studies. Furthermore, the reaction to past performance is somewhat different for institutions than for retail customers. In particular, institutions respond less positively (negatively) to the best (worst) performance decile. We also find that the reactions to performance do not vary significantly by fund objective.