Evidence from Purchases and Redemptions in the Spanish Equity Fund Market

52 Pages Posted: 7 Jun 2019

See all articles by María Isabel Cambón

María Isabel Cambón

Comisión Nacional de Mercado de Valores

Ramiro Losada

Comision Nacional del Mercado de Valores

Date Written: 2013

Abstract

The potential relationship between fund flows and performance is a remarkable topic in the mutual fund industry that has been explored by many empirical academic papers. In this work, it is shown that investors in Spanish equity funds respond to past good performance by increasing their (net) purchases, and to past poor performance by reducing their (net) purchases. However, the relationship be-tween flows and performance appears to be non-linear. This non-linearity is different from the one observed in most of the previous research papers. These papers did not find any response to poor performance. Net purchases, purchases and redemptions are analysed separately and, as a new feature, the retail and wholesale markets of mutual funds are addressed. The comparison of the two markets reveals some interesting differences on the determinants of the financial decisions regarding purchasing or selling shares of equity funds. It was also found that investor sensitivity to poor performance is reduced in the case of more visible funds. This puzzling result, which originates in the retail segment, could be explained in terms of the market power of fund families.

Keywords: mutual funds, flows, performance, retail

JEL Classification: G11, G23

Suggested Citation

Cambón, María Isabel and Losada, Ramiro, Evidence from Purchases and Redemptions in the Spanish Equity Fund Market (2013). CNMV Working Paper No. 56, November 2013. Available at SSRN: https://ssrn.com/abstract=3400667 or http://dx.doi.org/10.2139/ssrn.3400667

María Isabel Cambón (Contact Author)

Comisión Nacional de Mercado de Valores ( email )

Edison 4
Madrid, 28006
Spain

Ramiro Losada

Comision Nacional del Mercado de Valores ( email )

c/edison 4
Madrid, Madrid 28006
Spain

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