Journal of Banking & Finance Vol. 33 No. 11 2009
The dynamics of short-term mutual fund flows and returns: A time-series and cross-sectional investigation
Abstract
This study analyzes the dynamics of daily mutual fund flows. A Vector Auto Regression (VAR) of flows and returns shows that the behavior of fund investors is more consistent with contrarian rather than momentum characteristics. Past fund flows have a positive impact on future fund returns, with the long-term information effect dominating the transient price-pressure effect. Seasonality in daily flows, such as day-of-week and day-of-month patterns are present, and daily flows are generally mean-reverting. Probit regressions indicate that fund investment objective, marketing policy and level of active management explain cross-sectional variation in the behavioral patterns displayed in daily flows. Our results are robust to the different methods of calculating daily flows based on whether or not the day-end TNA figures include the current-day’s flow. Throughout the analysis, we contrast the dynamics of daily flows with established results for monthly fund flows and find important differences between the two.
- DOI
- 10.1016/j.jbankfin.2009.05.001
- Volume
- 33
- Issue
- 11
- Pages
- 2102-2109
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib