Mutual Funds Apart from the Crowd

49 Pages Posted: 26 Apr 2016 Last revised: 20 May 2018

See all articles by Nadia Vozlyublennaia

Nadia Vozlyublennaia

Securities and Exchange Commission (SEC)

Youchang Wu

University of Oregon - Lundquist College of Business

Date Written: May 16, 2018

Abstract

We construct measures of mutual fund uniqueness using cluster analysis of fund returns. We find that fund uniqueness persists over time, and is higher for more actively managed funds. More unique funds charge higher fees, but they do not deliver better net-of-fee performance. Fund uniqueness reduces the sensitivity of fund flows to past performance and increases performance persistence, especially when funds perform poorly. Non-unique funds exhibit neither convexity in the flow-performance relation nor performance persistence. Our results suggest that unique funds are better able to retain investors after poor performance, which may in turn increase the persistence of poor performance.

Keywords: Mutual fund, Fund flow, fund performance, cluster analysis

JEL Classification: G23, G34

Suggested Citation

Vozlyublennaia, Nadia and Wu, Youchang, Mutual Funds Apart from the Crowd (May 16, 2018). Available at SSRN: https://ssrn.com/abstract=2769161 or http://dx.doi.org/10.2139/ssrn.2769161

Nadia Vozlyublennaia

Securities and Exchange Commission (SEC) ( email )

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

Youchang Wu (Contact Author)

University of Oregon - Lundquist College of Business ( email )

1280 University of Oregon
Eugene, OR 97403
United States

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