Journal of Financial Economics Vol. 65 No. 1 2002
The dilution impact of daily fund flows on open-end mutual funds
Abstract
We examine how mutual fund flows that are correlated with subsequent fund returns can have a dilution impact on the performance of open-end funds. Active trading of open-end funds has a meaningful economic impact on the returns of passive, nontrading shareholders, particularly in U.S.-based international funds. The overall sample of domestic equity funds shows no dilution impact, but we find an annualized negative impact of 0.48% in international funds (and nearly 1% for a subsample of funds whose daily flows are particularly large). The exchange and pricing policies of mutual funds can thus have important performance-related implications.
- DOI
- 10.1016/s0304-405x(02)00137-x
- Volume
- 65
- Issue
- 1
- Pages
- 131-158
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref