Investors Do Respond to Poor Mutual Fund Performance: Evidence from Inflows and Outflows

21 Pages Posted: 15 Sep 2012

See all articles by George D. Cashman

George D. Cashman

Marquette University; Texas Tech University

Daniel Deli

Securities and Exchange Commission (SEC)

Federico Nardari

University of Melbourne - Department of Finance

Sriram V. Villupuram

University of Texas at Arlington - Department of Finance and Real Estate

Multiple version iconThere are 2 versions of this paper

Date Written: November 2012

Abstract

We examine the relation between mutual fund performance and gross flows for a large sample of actively managed U.S. mutual funds. Unlike previous studies that have only examined periods of generally increasing net flows, our sample includes periods of both increasing and decreasing net flows. We find that outflows are related to performance, with investors withdrawing money from poor performers. We also find that outflows and inflows respond asymmetrically to performance, outflows increase more aggressively following poor performance, and inflows increase more aggressively following good performance. Additionally, we find a symmetric performance net flow relation.

Keywords: mutual funds, performance flow relation, mutual fund flows

JEL Classification: G23, L14

Suggested Citation

Cashman, George D. and Deli, Daniel and Nardari, Federico and Villupuram, Sriram V., Investors Do Respond to Poor Mutual Fund Performance: Evidence from Inflows and Outflows (November 2012). Financial Review, Vol. 47, Issue 4, pp. 719-739, 2012. Available at SSRN: https://ssrn.com/abstract=2147081 or http://dx.doi.org/10.1111/j.1540-6288.2012.00346.x

George D. Cashman (Contact Author)

Marquette University ( email )

College of Business Administration
P.O. Box 1881
Milwaukee, WI 53201-1881
United States
4142881448 (Phone)

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Daniel Deli

Securities and Exchange Commission (SEC)

450 Fifth Street, NW
Washington, DC 20549-1105
United States

Federico Nardari

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Sriram V. Villupuram

University of Texas at Arlington - Department of Finance and Real Estate ( email )

Box 19449 UTA
Arlington, TX 76019
United States

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