Do After-Tax Returns Affect Mutual Fund Inflows?
AbstractThis paper explores the relationship between the after-tax returns that taxable investors earn on equity mutual funds and the subsequent cash inflows to these funds. Previous studies have documented that funds with high pretax returns attract greater inflows. This paper investigates the relative predictive power of pre-tax and after-tax returns for explaining annual fund inflows. The empirical results, based on a large sample of equity mutual funds over the period 1993-1998, suggest that after-tax returns have more explanatory power than pretax returns in explaining inflows. In addition, funds with large overhangs' of unrealized capital gains experience smaller inflows, all else equal, than funds without such unrealized gains. By disaggregating net fund inflows into gross inflows and gross redemptions, the paper also provides some insight on how after-tax returns and prospective capital gain realizations affect investor behavior.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7595.
Date of creation: Mar 2000
Date of revision:
Publication status: published as Bergstresser, Daniel and James Poterba. "Do After-Tax Returns Affect Mutual Fund Inflows?," Journal of Financial Economics, 2002, v63(3,Mar), 381-414.
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Other versions of this item:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-03-20 (All new papers)
- NEP-FIN-2000-03-20 (Finance)
- NEP-FMK-2000-03-20 (Financial Markets)
- NEP-PBE-2000-03-20 (Public Economics)
- NEP-PUB-2000-03-20 (Public Finance)
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