Dumb Money: Mutual Fund Flows and the Cross-Section of Stock Returns
AQR Capital Management, LLC
Owen A. Lamont
Harvard University - Department of Economics
NBER Working Paper No. w11526
We use mutual fund flows as a measure for individual investor sentiment for different stocks, and find that high sentiment predicts low future returns at long horizons. Fund flows are dumb money %uF818 by reallocating across different mutual funds, retail investors reduce their wealth in the long run. This dumb money effect is strongly related to the value effect. High sentiment also is associated high corporate issuance, interpretable as companies increasing the supply of shares in response to investor demand.
Number of Pages in PDF File: 60
Date posted: September 15, 2005