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