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The exclamation mark of Cain: Risk salience and mutual fund flows

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  • Mugerman, Yevgeny
  • Steinberg, Nadav
  • Wiener, Zvi

Abstract

We study a regulation that increased mutual funds’ risk salience through name change. Using daily fund flow data and several identification strategies, we find that requiring certain fixed income mutual funds to affix an exclamation mark ("!") to their names caused a statistically and economically significant decline in their net flows, with a larger effect on fund inflows than outflows. The exclamation mark's impact stems from retail investors, both those that seek financial advice and those that invest independently. Mutual funds “defamed” by the exclamation mark designation actually increased their exposure to the particular risk highlighted by the regulator.

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  • Mugerman, Yevgeny & Steinberg, Nadav & Wiener, Zvi, 2022. "The exclamation mark of Cain: Risk salience and mutual fund flows," Journal of Banking & Finance, Elsevier, vol. 134(C).
    • Handle: RePEc:eee:jbfina:v:134:y:2022:i:c:s0378426621002831
    DOI: 10.1016/j.jbankfin.2021.106332
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    5. Noam Ben-Ze'ev, 2023. "Drivers of Flows-Performance Sensitivity in Mutual Funds," Bank of Israel Working Papers 2023.06, Bank of Israel.

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    More about this item

    Keywords

    Mutual funds; Regulation; Investor attention; Investor protection;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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