Risk and Fund Flows

50 Pages Posted: 1 Feb 2011 Last revised: 17 Jul 2013

See all articles by Christopher P. Clifford

Christopher P. Clifford

University of Kentucky

Jon A. Fulkerson

University of Dayton

Bradford D. Jordan

University of Florida; University of Florida - Department of Finance, Insurance and Real Estate

Steve Waldman

University of Kentucky - Gatton College of Business and Economics

Date Written: June 16, 2013

Abstract

We study the impact of risk on mutual fund flows. Consistent with prior literature, we find evidence that net flows show aversion to risk. We show, however, that gross inflows and outflows are positively related to risk. While this result appears rational for outflows, it appears anomalous for inflows. We find that inflows are positively related to idiosyncratic risk, rather than systematic risk, and that institutional investors and incumbent investors are less susceptible to this behavior. Our results extend a growing body of evidence that finds certain investors making sub-optimal investment decisions, such as buying past winners, regardless of risk.

Keywords: Mutual Fund Flows

Suggested Citation

Clifford, Christopher P. and Fulkerson, Jon A. and Jordan, Bradford D. and Waldman, Steve, Risk and Fund Flows (June 16, 2013). Available at SSRN: https://ssrn.com/abstract=1752362 or http://dx.doi.org/10.2139/ssrn.1752362

Christopher P. Clifford (Contact Author)

University of Kentucky ( email )

College of Business & Economics
Lexington, KY 40506-0034
United States
859-257-3850 (Phone)

Jon A. Fulkerson

University of Dayton ( email )

300 College Park
Dayton, OH 45469
United States

Bradford D. Jordan

University of Florida ( email )

Gainesilee, FL 40506
United States

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

Steve Waldman

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States

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