Open AccessThe Effect of Performance on Israeli Equity Fund Flows
Author(s) -
Ofer Arbaa,
Eva Varon,
Uri BenZion
Publication year - 2017
Publication title -
accounting and finance research
Language(s) - English
Resource type - Journals
eISSN - 1927-5994
pISSN - 1927-5986
DOI - 10.5430/afr.v6n4p272
Subject(s) - mutual fund , equity (law) , business , salient , economics , finance , political science , law
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.