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The Behavior of Investor Flows in Corporate Bond Mutual Funds

Management Science, Vol. 63, No. 5, May 2017, pp. 1365-1381

45 Pages Posted: 15 Mar 2012 Last revised: 18 Sep 2017

Yong Chen

Texas A&M University - Department of Finance

Nan Qin

College of Business, Northern Illinois University

Date Written: September 28, 2015

Abstract

This paper provides a comprehensive examination of money flows in corporate bond funds which, though less researched, represent an important setting to study investor behavior. Based on a large sample of corporate bond funds over 1991–2014, we first show that flows are sensitive to both fund performance and macro condition, but unlike equity funds, the flow-performance relationship is not convex. Then, we find that investor flows can predict fund performance. More importantly, the predictability cannot be explained by return momentum or price pressure but is subsumed by performance persistence. Finally, an examination of idiosyncratic flows reveals little evidence that fund investors use finer-than-public information.

Keywords: Corporate bond funds, investor flows, flow-performance relation, predictability of flows, idiosyncratic flows

JEL Classification: G10, G23

Suggested Citation

Chen, Yong and Qin, Nan, The Behavior of Investor Flows in Corporate Bond Mutual Funds (September 28, 2015). Management Science, Vol. 63, No. 5, May 2017, pp. 1365-1381. Available at SSRN: https://ssrn.com/abstract=2022059 or http://dx.doi.org/10.2139/ssrn.2022059

Yong Chen (Contact Author)

Texas A&M University - Department of Finance ( email )

360 Wehner Building
College Station, TX 77843-4218
United States

Nan Qin

College of Business, Northern Illinois University

1425 W. Lincoln Hwy.
DEKALB, IL 60115
United States

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