The 'Smart Money' Effect: Retail versus Institutional Mutual Funds

50 Pages Posted: 15 Mar 2012 Last revised: 24 Jul 2012

Date Written: March 12, 2012

Abstract

Do sophisticated investors exhibit a stronger “smart money” effect than unsophisticated ones? In this paper, I examine whether fund selection ability of institutional mutual fund investors is better than that of retail mutual fund investors. In line with the studies of Gruber (1996), Zheng (1999), and Keswani and Stolin (2008), I find a smart money effect for investors of both institutional and retail mutual funds. Surprisingly, the results suggest that investors of institutional funds, with a higher representation of more sophisticated investors, do not demonstrate a better fund selection ability.

Keywords: smart money effect, mutual funds, institutional investors, retail investors, institutional funds, retail funds, investment decisions

JEL Classification: G19, G23

Suggested Citation

Salganik-Shoshan, Galla, The 'Smart Money' Effect: Retail versus Institutional Mutual Funds (March 12, 2012). Available at SSRN: https://ssrn.com/abstract=2020365 or http://dx.doi.org/10.2139/ssrn.2020365

Galla Salganik-Shoshan (Contact Author)

Ben-Gurion University of the Negev ( email )

Beer Sheva
Israel

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
329
Abstract Views
2,059
Rank
167,723
PlumX Metrics