Abstract

http://ssrn.com/abstract=2022503
 


 



The Importance of Family: The Role of Mutual Fund Family Reputation in Investment Decisions


William Christopher Gerken


University of Kentucky - Finance

Laura T. Starks


University of Texas at Austin - Department of Finance

Michael Yates


University of Texas at Austin - McCombs School of Busiiness

December 20, 2014


Abstract:     
Based on theory, we hypothesize that fund family reputation affects individuals' mutual fund investment decisions and performance. In empirical tests of individual investor trades, we find supportive evidence of the hypothesis. Investors are significantly more likely to purchase funds from families with which they have previous experience, and particularly so if the previously experienced return was positive. Further consistent with theory, individuals' beliefs about more reputable families appear to change slowly. Moreover, the reputation effect appears to have positive outcomes - investors earn higher returns and risk-adjusted performance after reputation-based purchases even after controlling for investor ability and within-family correlation.

Number of Pages in PDF File: 51

Keywords: individual investor portfolio choice, mutual fund families, reputation

JEL Classification: L01, D83, G11, D14


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Date posted: March 15, 2012 ; Last revised: January 15, 2015

Suggested Citation

Gerken, William Christopher and Starks, Laura T. and Yates, Michael, The Importance of Family: The Role of Mutual Fund Family Reputation in Investment Decisions (December 20, 2014). Available at SSRN: http://ssrn.com/abstract=2022503 or http://dx.doi.org/10.2139/ssrn.2022503

Contact Information

William Christopher Gerken (Contact Author)
University of Kentucky - Finance ( email )
College of Business & Economics
Lexington, KY 40506-0034
United States
Laura T. Starks
University of Texas at Austin - Department of Finance ( email )
Red McCombs School of Business
Austin, TX 78712
United States
512-471-5899 (Phone)
512-471-5073 (Fax)
Michael Yates
University of Texas at Austin - McCombs School of Busiiness ( email )
Austin, TX 78712
United States
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