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Sentimental mutual fund flows
Author(s) -
Jiang George J.,
Yüksel H. Zafer
Publication year - 2019
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12201
Subject(s) - stylized fact , mutual fund , target date fund , closed end fund , income fund , fund administration , open end fund , manager of managers fund , business , investment fund , finance , economics , institutional investor , market liquidity , corporate governance , macroeconomics
We show that many stylized empirical patterns for mutual fund flows are driven by investor sentiment. Specifically, when sentiment is high, investors exhibit a stronger tendency of chasing past fund performance; fund flows are less sensitive to fund expenses; and investors are attracted more to funds with sheer visibility. Moreover, the well‐documented positive relation between fund flows and future fund performance is significant only during high sentiment periods and is mainly driven by expected component of fund flows. Finally, we show that mutual fund investors exhibit a significantly negative timing ability at the individual fund level when sentiment is high.