The Effect of New Money Inflows on the Flow-Performance Relationship in the U.S. Mutual Fund Industry

Sigurdsson, Kari

doi:10.2139/ssrn.537823

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The Effect of New Money Inflows on the Flow-Performance Relationship in the U.S. Mutual Fund Industry

31 Pages Posted: 30 Apr 2004

See all articles by Kari Sigurdsson

Kari Sigurdsson

Schroders Investment Management

Date Written: March 11, 2004

Abstract

Several papers have documented a convex relationship between past performance and money flows in the U.S. mutual fund industry. This paper shows that the observed relationship is consistent with a simple rational portfolio allocation model where the main determinant is the inflow of new money to mutual funds. The effect of new money is shown by empirically testing how the relationship becomes steeper in periods when inflow of new money into mutual funds is high.

Keywords: Mutual Funds, Flow-Performance Relationship, Portfolio Choice

JEL Classification: G11, G23

Suggested Citation: Suggested Citation

Sigurdsson, Kari, The Effect of New Money Inflows on the Flow-Performance Relationship in the U.S. Mutual Fund Industry (March 11, 2004). Available at SSRN: https://ssrn.com/abstract=537823 or http://dx.doi.org/10.2139/ssrn.537823