Can Institutional Investors Outperform the Market? Evidence from the Israeli Market

Eden, Yoram; Kallir, Ido

doi:10.2139/ssrn.2557396

Cited by 1 publication

(1 citation statement)

References 32 publications

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“…In Israel, there are three recent studies on pension funds and one paper on provident funds (Steinberg and Porath, 2013; Kallir and Kaplan, 2015; Eden and Kallir, 2015; Hamdani et al , 2017). However, these studies focus mostly on portfolio performance and do not deal with the performance sensitivity of investor flows.…”

Section: Literaturementioning

confidence: 99%

Behavior of investor flows in Israeli provident funds

Arbaa

Varon

2019

IJMF

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Purpose The purpose of this paper is to study the sensitivity of provident fund investors to past performance and how market conditions, changes in risk and liquidity levels influence the net flows into provident funds by using a unique sample from Israel. Design/methodology/approach The study checks the impact of different levels of fund performance on provident fund flows using three alternative proxies for performance: raw return and the risk adjusted returns based on the Sharpe ratio and the Jensen’s α. The analysis relies on the time fixed effect and fund fixed effect regression models. Findings Results reveal that there exists an approximately concave flow–performance relationship and performance persistence among Israeli provident funds. Israeli provident fund investors are risk averse so they overreact to bad performance both in bull and bear markets. Moreover, liquidity is an important factor to influence the flow–performance curve. The investors’ strong negative response to poor performance and relative insensitivity to outperformance show that provident fund managers are not rewarded for their risk-shifting activities as in mutual funds. Originality/value The authors explore the behavior of investor flows in non-institutional retirement savings funds specifically outside of the USA, which is a topic not properly investigated in literature. Moreover, examining inflows and outflows separately gives the authors a richer understanding of investors in pension schemes. This study also enhances the understanding of the impact of fund liquidity on the flow–performance relationship for the retirement funds segment.

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Section: Literaturementioning

confidence: 99%