Participation Costs and the Sensitivity of Fund Flows to Past Performance

Huang, Jennifer; Wei, Kelsey D.; Yan, Hong

doi:10.1111/j.1540-6261.2007.01236.x

Cited by 487 publications

(307 citation statements)

References 36 publications

Supporting

Mentioning

259

Contrasting

Unclassified

Order By: Relevance

“…This is because investors tend to repeat their previous investment decisions, even if they are no longer optimal. Fund size (TNA t-1) adversely affects the rate of net flows to Israeli equity funds, which could indicate that funds reaching a certain size encounter difficulties functioning (Barber et al 2005;Huang et al 2007;Zhao 2005). Hence, all of our conclusions are in line with the existing literature except for category flows.…”

Section: Influence Of Performance On Three Months' Flowssupporting

confidence: 80%

“…We also considered the effect of other factors such as the fund expenses (Carhart, 1997: Sirri andTufano 1998), fund size (Barber et al 2005;Chen et al 2004;Chevalier and Ellison 1997;Huang et al 2007;Zhao 2005), net flows into the fund in previous periods (Jain and Wu 2000), aggregate flows into the fund's investment category (Del Guercio and Tkac 2002;Huang et al 2007;Kempf and Ruenzi 2008;Sirri and Tufano 1998). In line with the literature, we found that fund fees and asset size negatively influence cumulative fund flows, while net flows from previous periods have a positive effect.…”

Section: H4: There Is a Non-linear Relationship Between Past Performasupporting

confidence: 62%

“…Advertising reduces search costs for investors and enable them to make more informed decisions. Sirri and Tufano (1998) and Huang, Wei and Yan (2007) made similar conclusions for US equity funds. According to Sirri and Tufano (1998), advertisements often promote the most recent high performing fund and funds with higher fees enjoy flows from high performance that are twice as large as those of their rivals.…”

Section: Influence Of Performance On Flows With or Without Advertisementsupporting

confidence: 60%

“…Hence, all of our conclusions are in line with the existing literature except for category flows. We found no relation between fund category flows and cumulative fund flows of the subsequent three months although previous literature supports a positive association (Del Guercio and Tkac 2002;Huang et al 2007;Kempf and Ruenzi 2008;Sirri and Tufano 1998). This could be due to the time (seasonal) gap between category flows and the individual fund flows.…”

Section: Influence Of Performance On Three Months' Flowscontrasting

confidence: 56%

See 3 more Smart Citations

The Effect of Performance on Israeli Equity Fund Flows

Arbaa¹,

Varon²,

Ben‐Zion³

2017

AFR

View full text Add to dashboard Cite

This paper examines the influence of past performance on Israeli equity mutual funds' net flows between January 2004 and July 2014, using the most recommended and reliable two-cluster regression methodology. Apparently, Israeli investors are more sensitive to risk adjusted returns than absolute returns and the most recent performance seems to be more influential on fund flows than on longer-term past performance. Moreover, investors flock to the latest winners and do not leave the funds with the poorest performance. The effect of past performance seems to be more salient on flows of advertised funds than of those with no advertisement. The results in Israel augment the scant work on mutual fund flows outside the US and add support to a growing body of literature documenting irrational investor behavior worldwide.

show abstract

Section: Influence Of Performance On Three Months' Flowssupporting

confidence: 80%

Section: H4: There Is a Non-linear Relationship Between Past Performasupporting

confidence: 62%

Section: Influence Of Performance On Flows With or Without Advertisementsupporting

confidence: 60%

Section: Influence Of Performance On Three Months' Flowscontrasting

confidence: 56%

See 2 more Smart Citations

The Effect of Performance on Israeli Equity Fund Flows

Arbaa¹,

Varon²,

Ben‐Zion³

2017

AFR

View full text Add to dashboard Cite

show abstract

“…The literature therefore studied that the moving capital and volatility of fund flows also gradually increased. For example, Huang et al (2007) and Ping (2001) investigated the effects and relationship between performance and fund flows for the actively managed mutual funds. Huang et al (2012) illustrated theoretically that when some sophisticated investors learn from past fund performance to form their posterior expectations of managerial ability, the flow-performance sensitivity should be weaker for funds with more volatile past performance and longer track records.…”

Section: Performance Volatilitymentioning

confidence: 99%

What Operational Characteristics of Mutual Funds Affect Exit Decisions and When? Evidence from Taiwan

Wang¹,

Huang²

2013

IJEF

View full text Add to dashboard Cite

We investigated fund operating characteristics that cause fund companies to perform fund exit decisions and at what point of funds' lifecycles apply to fund liquidation or mergers. We also examined whether extra variable causes an important determinant effect and how fund operating characteristics before and after fund liquidations or mergers change. The empirical results show that: (1) the factors that affect within-family mergers are fund performance and flow from both cross-section and time-series views. The total net assets affect within-family mergers just in a cross-section analysis, not a lifecycle characteristic in a time-series analysis. Moreover, we found that performance volatility also affects exit decisions. The expense ratio and fund age are not the determinants for three type fund exits in Taiwanese onshore funds. (2) For the liquidation, total net assets, flow, performance volatility, and mid-term buy-hold returns have a significantly negative relationship with the fund liquidations from both the cross-section and time-series views. (3) In general, cross-family fund mergers are potentially conducted for strategic considerations rather than based on specific factors. (4) The performance volatility level before and following mergers was substantial and significant for within-family fund mergers; the expense ratio level before mergers was significant greater than following mergers for cross-family fund mergers.

show abstract

Investor behavior and the demand for conventional and socially responsible mutual funds

Matallín‐Sáez

Soler‐Domínguez

Navarro-Montoliu

et al. 2021

Corp Soc Responsibility Env

View full text Add to dashboard Cite

This study analyzes the demand for conventional and socially responsible (SR) mutual funds using cash flow data from a large sample of U.S. equity funds. For both types of funds, previous results have a positive impact on inflows. However, redemptions' behavior differs. Outflows correlate negatively with past results in conventional portfolios, whereas this relationship is positive for SR funds: investors are more likely to redeem shares in the best‐performing funds while holding funds that performed poorly. This behavior is compatible with a disposition effect in SR funds. These results hold even after controlling for other variables driving mutual fund demand. Hence, inflows and outflows of conventional funds were found to be positively related to past idiosyncratic risk, expenses and turnover, but negatively related to size and age. For SR funds, these relationships are stronger for size and idiosyncratic risk, and take the opposite sign for age, expenses and turnover.

show abstract

Participation Costs and the Sensitivity of Fund Flows to Past Performance

Cited by 487 publications

References 36 publications

The Effect of Performance on Israeli Equity Fund Flows

The Effect of Performance on Israeli Equity Fund Flows

What Operational Characteristics of Mutual Funds Affect Exit Decisions and When? Evidence from Taiwan

Investor behavior and the demand for conventional and socially responsible mutual funds

Contact Info

Product

Resources

About