Does MAX Matter for Mutual Funds?

47 Pages Posted: 13 Nov 2017

Multiple version iconThere are 2 versions of this paper

Date Written: November 13, 2017


We examine the lottery characteristics of mutual funds. We proxy for lottery characteristics using past extreme daily returns within a month, or MAX. We find that high MAX funds underperform both in portfolio sorts and cross-sectional regression tests. This result suggests that the MAX effect documented for individual stocks is also present within diversified portfolios of mutual funds. Using mutual fund flows, we also show direct evidence of strong retail, but not institutional, investor demand for high MAX funds. Overall, our findings indicate that retail investors exhibit demand for lottery-like funds that are likely to suffer from future underperformance.

Keywords: Mutual fund flows and performance, MAX, lottery preferences, skewness

JEL Classification: G11, G23

Suggested Citation

Goldie, Bradley A. and Henry, Tyler R. and Kassa, Haim, Does MAX Matter for Mutual Funds? (November 13, 2017). Available at SSRN: or

Bradley A. Goldie

Miami University ( email )

2029 Farmer School of Business
800 E. High Street
Oxford, OH 45056
United States
(513) 529-3657 (Phone)
(513) 529-6992 (Fax)

Tyler R. Henry

Miami University ( email )

Oxford, OH 45056
United States

Haim Kassa (Contact Author)

Miami University ( email )

800 E. Main St
The Farmer School of Business
Oxford, OH 45056
United States
(513) 529-2057 (Phone)
(513) 556-4891 (Fax)


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