IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v61y2024ics1544612324000746.html
   My bibliography  Save this article

Investor traps: Funds launched during booms

Author

Listed:
  • Xu, Bu
  • Xu, Quanyi
  • Liu, Xinxin
  • Qin, Qirui

Abstract

Mutual fund companies typically launch new funds during booms, but little is known about how this behavior relates to investor returns. Using a sample of Chinese open-end mutual funds from 2005 to 2022, we find that the hotter the markets at fund inception, the lower the future investor returns. Fund underperformance and inferior investor premiums explain the lower investor returns. Moreover, fund underperformance is largely due to inappropriate timing of risk exposures, while inferior investor premiums indicate investors' unsophisticated capital flow decisions. Our study suggests that new fund inceptions during booms help increase management fees at the expense of investors.

Suggested Citation

  • Xu, Bu & Xu, Quanyi & Liu, Xinxin & Qin, Qirui, 2024. "Investor traps: Funds launched during booms," Finance Research Letters, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612324000746
    DOI: 10.1016/j.frl.2024.105044
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612324000746
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2024.105044?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Fund inception; Investor return; Fund market state; Investor premium; Return decomposition;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G40 - Financial Economics - - Behavioral Finance - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612324000746. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.