Family Values and the Star Phenomenon

43 Pages Posted: 26 Dec 2000

See all articles by Vikram K. Nanda

Vikram K. Nanda

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics

Z. Jay Wang

University of Oregon - Charles H. Lundquist School of Business

Lu Zheng

University of California, Irvine - Paul Merage School of Business

Date Written: February 2003

Abstract

We examine the extent to which a fund's cash flows are affected by the stellar performance of other funds in its family - and consequences of such spillovers. We show that star performance results in greater cash inflow to the fund and to other funds in its family. Moreover, families with higher variation in investment strategies across funds are shown to be more likely to generate star performance. We argue that spillovers may induce lower ability families to pursue star creating strategies. Consistent with our conjecture, families with high variation in investment strategies across funds significantly underperform low variation families.

Keywords: Mutual Funds, Performance Evaluation, Cash Flow, Fund Complex, Fund Family, Investment

JEL Classification: G0, G1, G2

Suggested Citation

Nanda, Vikram K. and Wang, Zhi Jay and Zheng, Lu, Family Values and the Star Phenomenon (February 2003). AFA 2003 Washington, DC Meetings. Available at SSRN: https://ssrn.com/abstract=254626 or http://dx.doi.org/10.2139/ssrn.254626

Vikram K. Nanda

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics ( email )

2601 North Floyd Road
P.O. Box 830688
Richardson, TX 75083
United States

Zhi Jay Wang

University of Oregon - Charles H. Lundquist School of Business

1208 University of Oregon
Eugene, OR 97403-1208
United States

Lu Zheng (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States
9498248365 (Phone)

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