Investor Attrition and Fund Flows in Mutual Funds

42 Pages Posted: 29 Mar 2014 Last revised: 11 May 2015

See all articles by Susan Kerr Christoffersen

Susan Kerr Christoffersen

University of Toronto - Rotman School of Management; Copenhagen Business School

Haoyu Xu

Shanghai University of Finance and Economics

Date Written: May 9, 2015

Abstract

We explore the properties of equity mutual funds that experience a loss of assets after poor performance. We document that both inflows and outflows are less sensitive to performance because performance-sensitive investors leave or decide not to invest after bad performance. Consistent with the idea that attrition measures the sorting of performance-sensitive investors, we find that attrition has less of an impact on the fund’s flow-performance sensitivity for institutional funds where there is less dispersion in investor performance- sensitivity. Also attrition has no effect on the flow-performance sensitivity when attrition arises after good performance or investors invest for non-performance reasons.

Keywords: Flow-performance relation, mutual funds, attrition

JEL Classification: G11, G23

Suggested Citation

Christoffersen, Susan E. and Xu, Haoyu, Investor Attrition and Fund Flows in Mutual Funds (May 9, 2015). Rotman School of Management Working Paper No. 2417091. Available at SSRN: https://ssrn.com/abstract=2417091 or http://dx.doi.org/10.2139/ssrn.2417091

Susan E. Christoffersen

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416 946 5647 (Phone)
416 971 3048 (Fax)

HOME PAGE: http://www.rotman.utoronto.ca/schristoffersen

Copenhagen Business School

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Haoyu Xu (Contact Author)

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

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