Abstract

http://ssrn.com/abstract=972780
 
 

References (54)



 
 

Citations (8)



 


 



Investor Learning and Mutual Fund Flows


Jennifer C. Huang


University of Texas at Austin - Department of Finance

Kelsey D. Wei


University of Texas at Dallas

Hong Yan


Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF)

January 15, 2012

AFA 2012 Chicago Meetings Paper

Abstract:     
This paper investigates the implications of investor learning for the sensitivity of mutual fund flows to past performance. We illustrate theoretically that when some sophisticated investors learn from past fund performance to form their posterior expectations of managerial ability, the flow-performance sensitivity should be weaker for funds with more volatile past performance and longer track records. Moreover, the dampening effects of performance volatility and fund age on the flow-performance sensitivity should be stronger for funds attracting more sophisticated investors. We provide supporting evidence for this investor learning hypothesis using mutual fund flows and compare the relative level of sophistication among investors in load versus no-load funds, institutional versus retails funds, and star versus non-star funds.

Number of Pages in PDF File: 38

Keywords: Bayesian learning, mutual fund flows, volatility, flow-performance relationship

JEL Classification: G10, G11, G20, G23

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Date posted: March 16, 2011 ; Last revised: January 31, 2012

Suggested Citation

Huang, Jennifer C. and Wei, Kelsey D. and Yan, Hong, Investor Learning and Mutual Fund Flows (January 15, 2012). AFA 2012 Chicago Meetings Paper. Available at SSRN: http://ssrn.com/abstract=972780 or http://dx.doi.org/10.2139/ssrn.972780

Contact Information

Jennifer Chunyan Huang (Contact Author)
University of Texas at Austin - Department of Finance ( email )
McCombs School of Business, B6600
Austin, TX 78712
United States
512-232-9375 (Phone)
512-471-5073 (Fax)
Kelsey D. Wei
University of Texas at Dallas ( email )
P.O. Box 830688
Richardson, TX 75083-0688
United States
9728835978 (Phone)
Hong Yan
Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )
Shanghai
China
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