What is Mutual Fund Flow?

71 Pages Posted: 7 Oct 2019

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Sofia Johan

Florida Atlantic University - Finance; University of Aberdeen; Tilburg Law and Economics Center (TILEC)

Yelin Zhang

Gonzaga University - School of Business Administration

Date Written: June 2, 2019

Abstract

Distinguishing between switches, pre-authorized contributions, systematic withdrawal plans, reinvestments, and distributions, we find that different types of fund flow exhibit distinct characteristics to retail fund flow with respect to fund fees and past performance. We argue that the positive correlation between retail fund inflow and switch-out reflects information asymmetry between incoming investors and current unitholders. This information asymmetry is more common when fund series are sold through dealers or brokers. We further show that this information asymmetry, attributed to biased purchase advice, is negatively associated with fund performance. A large sample of proprietary data from 2003–2014 support our findings, including but not limited to results from funds that invest only in the US, and funds that invest worldwide.

Keywords: Mutual Fund Flows, Mutual Fund Returns, Trailer Fees, Information Asymmetry

JEL Classification: G23, G30

Suggested Citation

Cumming, Douglas J. and Johan, Sofia A. and Zhang, Yelin, What is Mutual Fund Flow? (June 2, 2019). Journal of International Financial Markets, Institutions and Money, Vol. 62, No. 222-251, 2019, Available at SSRN: https://ssrn.com/abstract=3460282

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Sofia A. Johan

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

University of Aberdeen ( email )

Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Yelin Zhang (Contact Author)

Gonzaga University - School of Business Administration ( email )

Spokane, WA
United States

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