Risk and Fund Flows

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

Christopher P. Clifford

University of Kentucky

Jon A. Fulkerson

Loyola University Maryland - Sellinger School of Business & Management

Bradford D. Jordan

University of Kentucky - Gatton College of Business and Economics

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

Loyola University Maryland - Sellinger School of Business & Management ( email )

4501 North Charles Street
Baltimore, MD 21210-2699
United States
410-617-5634 (Phone)

Bradford D. Jordan

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

Lexington, KY 40506
United States
859-257-4887 (Phone)
859-257-9688 (Fax)

Steve Waldman

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

Lexington, KY 40506
United States

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