Is money smart? A study of mutual fund investors' fund selection ability

Article Abstract:

A previous study finds evidence to support selection ability among active fund investors for equity funds listed in 1982. Using a large sample of equity funds, I find evidence that funds that receive more money subsequently perform significantly better than those that lose money. This effect is short-lived and is largely but not completely explained by a strategy of betting on winners. In the aggregate, there is no significant evidence that funds that receive more money subsequently beat the market. However, it is possible to earn positive abnormal returns by using the cash flow information for small funds. (Reprinted by permission of the publisher.)

Economic aspects, Investments, Money, Investors

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Costly search and mutual fund flows

Article Abstract:

This paper studies the flows of funds into and out of equity mutual funds. Consumers base their fund purchase decisions on prior performance information, but do so asymmetrically, investing disproportionately more in funds that performed very well the prior period. Search costs seem to be an important determinant of fund flows. High performance appears to be most salient for funds that exert higher marketing effort, as measured by higher fees. Flows are directly related to the size of the fund's complex as well as the current media attention received by the fund, which lower consumers' search costs. (Reprinted by permission of the publisher.)

Online searching, Searching behavior

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Stock splits: evidence from mutual funds

Article Abstract:

Mutual fund splits occur in high-priced funds after unusually high returns. Split factors are related to the deviation of a fund's price from the mean of all fund prices. Post-split prices are below the mean of other fund's prices. Post-split numbers of shareholders and assets do not increase compared with funds having similar rates of asset growth. However, I find evidence that mutual fund splits bring per account shareholdings back up to normal levels. I argue that signaling, liquidity, and tick size theories do not apply to mutual fund splits. (Reprinted by permission of the publisher.)

Stock splitting

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