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
Date Written: September 28, 2015
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: Suggested Citation