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http://ssrn.com/abstract=776014
 
 

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Dumb Money: Mutual Fund Flows and the Cross-Section of Stock Returns


Andrea Frazzini


AQR Capital Management, LLC

Owen A. Lamont


Harvard University - Department of Economics

August 2005

NBER Working Paper No. w11526

Abstract:     
We use mutual fund flows as a measure for individual investor sentiment for different stocks, and find that high sentiment predicts low future returns at long horizons. Fund flows are dumb money %uF818 by reallocating across different mutual funds, retail investors reduce their wealth in the long run. This dumb money effect is strongly related to the value effect. High sentiment also is associated high corporate issuance, interpretable as companies increasing the supply of shares in response to investor demand.

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Date posted: September 15, 2005  

Suggested Citation

Frazzini, Andrea and Lamont, Owen A., Dumb Money: Mutual Fund Flows and the Cross-Section of Stock Returns (August 2005). NBER Working Paper No. w11526. Available at SSRN: http://ssrn.com/abstract=776014

Contact Information

Andrea Frazzini
AQR Capital Management, LLC ( email )
Two Greenwich Plaza, 3rd Floor
Greenwich, CT 06830
United States
203-742-3894 (Phone)
203-742-3394 (Fax)
HOME PAGE: http://www.econ.yale.edu/~af227/
Owen A. Lamont (Contact Author)
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
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