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Which Money Is Smart? Mutual Fund Buys and Sells of Individual and Institutional Investors
Author(s) -
KESWANI ANEEL,
STOLIN DAVID
Publication year - 2008
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2008.01311.x
Subject(s) - mutual fund , business , monetary economics , institutional investor , closed end fund , stock (firearms) , momentum (technical analysis) , finance , economics , financial system , financial economics , corporate governance , market liquidity , mechanical engineering , engineering
Gruber (1996) and Zheng (1999) report that investors channel money toward mutual funds that subsequently perform well. Sapp and Tiwari (2004) find that this “smart money” effect no longer holds after controlling for stock return momentum. While prior work uses quarterly U.S. data, we employ a British data set of monthly fund inflows and outflows differentiated between individual and institutional investors. We document a robust smart money effect in the United Kingdom. The effect is caused by buying (but not selling) decisions of both individuals and institutions. Using monthly data available post‐1991 we show that money is comparably smart in the United States.