The Determinants and Implications of Mutual Fund Cash Holdings: Theory and Evidence

26 Pages Posted: 17 Sep 2006

See all articles by Xuemin Sterling Yan

Xuemin Sterling Yan

Lehigh University - College of Business

Abstract

In this article, I examine the determinants and implications of equity mutual fund cash holdings. In cross-sectional tests, I find evidence generally supportive of a static trade-off model developed in this article. In particular, small-cap funds and funds with more-volatile fund flows hold more cash. However, I do not find that fund managers with better stockpicking skills hold less cash. Aggregate cash holdings by equity mutual funds are persistent and positively related to lagged aggregate fund flows. Aggregate cash holdings do not forecast future market returns, suggesting that equity funds as a whole do not have market timing skills.

Suggested Citation

Yan, Xuemin Sterling, The Determinants and Implications of Mutual Fund Cash Holdings: Theory and Evidence. Financial Management, Vol. 35, No. 2, Summer 2006, Available at SSRN: https://ssrn.com/abstract=929710

Xuemin Sterling Yan (Contact Author)

Lehigh University - College of Business ( email )

Bethlehem, PA 18015
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
22
Abstract Views
1,828
PlumX Metrics