Cash Holdings and the Performance of European Mutual Funds

Graef, Frank; Vogt, Pascal; Vonhoff, Volker; Weigert, Florian

doi:10.2139/ssrn.3125678

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Cash Holdings and the Performance of European Mutual Funds

Finance Research Letters, Forthcoming

14 Pages Posted: 18 Feb 2018 Last revised: 10 Aug 2018

See all articles by Frank Graef

Volker Vonhoff

University of Mannheim - Department of Business Administration and Finance

Florian Weigert

University of Neuchatel - Institute of Financial Analysis; University of Cologne - Centre for Financial Research (CFR)

Date Written: July 9, 2018

Abstract

We investigate the determinants and performance implications of cash holdings for a large sample of actively-managed equity funds domiciled in the European Union (EU). In line with recent evidence from the US, we observe that cash holdings are strongly influenced by a fund's fee structure, past flows and flow volatility, and a fund's investment strategy. EU Funds with cash holdings in excess of the level predicted by fund attributes (i.e., high abnormal cash funds) earn higher risk-adjusted returns of 0.48% than their low abnormal cash peers over the subsequent six-months period. However, this outperformance disappears after 12 to 18 months.

Keywords: Cash Holdings, Mutual Funds, Performance Evaluation

JEL Classification: G10, G11, G15, G23

Suggested Citation: Suggested Citation

Graef, Frank and Vogt, Pascal and Vonhoff, Volker and Weigert, Florian, Cash Holdings and the Performance of European Mutual Funds (July 9, 2018). Finance Research Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3125678 or http://dx.doi.org/10.2139/ssrn.3125678