48 Pages Posted: 2 Aug 2019 Last revised: 14 Jul 2021

See all articles by Caitlin D Dannhauser

Caitlin D Dannhauser

Villanova University - Department of Finance

Jeffrey Pontiff

Boston College - Department of Finance

Date Written: July 29, 2019


Using identical periods and specifications, we compare investment flows to active mutual funds (AMFs), index mutual funds (IMFs), and exchange traded funds (ETFs). All dimensions of performance—vehicle, factor-related, benchmark, style, and skill—contribute to flow-performance sensitivity. A cross-section inclusive of all vehicles produces sensitivities up to three times larger than within vehicle sensitivities. Future abnormal returns are uncorrelated with flow and are similar across vehicles. Aggregate ETF market flows are negatively related to future market returns. Although our findings contradict many previous explanations, most reconcile with Berk and Green (2004) and to a lesser extent extrapolative expectations.

Keywords: Investment Flow, ETFs, Mutual Funds, Passive Investment

JEL Classification: G12, G14, G23

Suggested Citation

Dannhauser, Caitlin D and Pontiff, Jeffrey, FLOW (July 29, 2019). Available at SSRN: https://ssrn.com/abstract=3428702 or http://dx.doi.org/10.2139/ssrn.3428702

Caitlin D Dannhauser (Contact Author)

Villanova University - Department of Finance ( email )

United States
610-519-4348 (Phone)

Jeffrey Pontiff

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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