The Determinants of Investment Flows: Retail versus Institutional Mutual Funds
49 Pages Posted: 30 Jul 2012 Last revised: 6 May 2016
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The Determinants of Investment Flows: Retail versus Institutional Mutual Funds
The Determinants of Investment Flows: Retail Versus Institutional Mutual Funds
Date Written: June 29, 2013
Abstract
This paper compares the fund selection criteria used by investors in retail mutual funds with the criteria of investors in institutional mutual funds. I find that, compared with investors of retail mutual funds, clients of institutional mutual funds use more quantitatively sophisticated criteria such as risk-adjusted return measures and tracking error, demonstrate stronger momentum-driven and herding behaviors, and are less sensitive to fund expense ratio. In addition, I provide evidence that the previously-documented convex form of the flow-performance relationship is driven mostly by retail funds.
Keywords: mutual funds, institutional investors, retail investors, institutional funds, retail funds, investment decisions, fund flows, performance evaluation
JEL Classification: G02, G11, G23
Suggested Citation: Suggested Citation