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Seasonal Asset Allocation: Evidence from Mutual Fund Flows

127 Pages Posted: 17 Nov 2011 Last revised: 4 Sep 2015

Mark J. Kamstra

York University - Schulich School of Business; Rady School of Management

Lisa A. Kramer

University of Toronto - Rotman School of Management

Maurice D. Levi

University of British Columbia (UBC) - Sauder School of Business

Russ Wermers

University of Maryland - Robert H. Smith School of Business

Date Written: March 2015

Abstract

We analyze the flow of money between mutual fund categories, finding strong evidence of seasonality in investor risk aversion. Aggregate investor flow data reveal investor preference for safe mutual funds in autumn and risky funds in spring. During September alone, outflows from equity funds average $13 billion, controlling for previously documented flow determinants (e.g., capital-gain overhang). This movement of large amounts of money between fund categories is correlated with seasonality in investor risk aversion, consistent with investors preferring safer (riskier) investments in autumn (spring). We find consistent evidence in Canada, and in Australia where seasons are offset by six months.

Keywords: household finance, mutual fund flow seasonality, net exchanges, net flows, sentiment, time-varying risk aversion, risk tolerance

JEL Classification: G11

Suggested Citation

Kamstra, Mark J. and Kramer, Lisa A. and Levi, Maurice D. and Wermers, Russ, Seasonal Asset Allocation: Evidence from Mutual Fund Flows (March 2015). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1907904 or http://dx.doi.org/10.2139/ssrn.1907904

Mark J. Kamstra

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Lisa A. Kramer (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-2496 (Phone)
416-971-3048 (Fax)

HOME PAGE: http://www.chass.utoronto.ca/~lkramer

Maurice David Levi

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Henry Angus 865
Vancouver BC V6T 1Z2
Canada
604-822-8260 (Phone)
604-822-8521 (Fax)

Russell R. Wermers

University of Maryland - Robert H. Smith School of Business ( email )

Department of Finance
College Park, MD 20742-1815
United States
301-405-0572 (Phone)
301-405-0359 (Fax)

HOME PAGE: http://www.rhsmith.umd.edu/finance/rwermers/

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