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The 'Smart Money' Effect: Retail versus Institutional Mutual Funds

Galla Salganik-Shoshan

Ben-Gurion University of the Negev

March 12, 2012

Do sophisticated investors exhibit a stronger “smart money” effect than unsophisticated ones? In this paper, I examine whether fund selection ability of institutional mutual fund investors is better than that of retail mutual fund investors. In line with the studies of Gruber (1996), Zheng (1999), and Keswani and Stolin (2008), I find a smart money effect for investors of both institutional and retail mutual funds. Surprisingly, the results suggest that investors of institutional funds, with a higher representation of more sophisticated investors, do not demonstrate a better fund selection ability.

Number of Pages in PDF File: 50

Keywords: smart money effect, mutual funds, institutional investors, retail investors, institutional funds, retail funds, investment decisions

JEL Classification: G19, G23

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Date posted: March 15, 2012 ; Last revised: July 24, 2012

Suggested Citation

Salganik-Shoshan, Galla, The 'Smart Money' Effect: Retail versus Institutional Mutual Funds (March 12, 2012). Available at SSRN: https://ssrn.com/abstract=2020365 or http://dx.doi.org/10.2139/ssrn.2020365

Contact Information

Galla Salganik-Shoshan (Contact Author)
Ben-Gurion University of the Negev ( email )
Beer Sheva
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References:  46