Against Dumb Money

77 Pages Posted: 16 Aug 2021 Last revised: 19 Aug 2022

See all articles by Junqing Kang

Junqing Kang

Lingnan College, Sun Yat-sen University

Shen Lin

Tianjin University - College of Management and Economics; PBCSF, Tsinghua University

Xiong Xiong

College of Management and Economics and China Center for Social Computing and Analytics

Date Written: August 19, 2022

Abstract

We propose a new measure, against dumb money (ADM), to identify skilled mutual fund managers. ADM evaluates fund investment skills by the extent to which the fund’s investment decisions are opposite to the decisions of dumb money. For each fund, the proposed measures examine the covariance between deviations of its portfolio weights from a benchmark portfolio and the abnormal shareholder number growth rates of underlying stocks in the fund’s investment universe. Our measures reveal strong predictability in the returns of Chinese equity funds and provide information about future fund returns that is not contained in the standard measures.

Keywords: Mutual fund; Retail investors; Exploring noise demand; Mutual fund skill

JEL Classification: G10, G20, G23

Suggested Citation

Kang, Junqing and Lin, Shen and Xiong, Xiong, Against Dumb Money (August 19, 2022). Available at SSRN: https://ssrn.com/abstract=3905050 or http://dx.doi.org/10.2139/ssrn.3905050

Junqing Kang

Lingnan College, Sun Yat-sen University ( email )

No. 135, Xingang Xi Road
Haizhu District
Guangzhou, Guangdong 510275
China
+8613617319162 (Phone)

Shen Lin (Contact Author)

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

PBCSF, Tsinghua University ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Xiong Xiong

College of Management and Economics and China Center for Social Computing and Analytics ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

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