Advanced Search
MyIDEAS: Login to save this paper or follow this series

Mutual fund flows’ performance reaction: does convexity apply to small markets?

Contents:

Author Info

  • Carlos F. Alves

    ()
    (CEMPRE, Faculdade de Economia, Universidade do Porto)

  • Victor Mendes

    ()
    (CMVM - Portuguese Securities Commission)

Abstract

In this paper we study the performance reaction of investors in a small market context. Instead of the asymmetrical investors’ reaction to winners and losers, as usually documented for the US, an absence of risk-adjusted performance reaction was observed. The absence of reaction can be attributed to either lower investor sophistication, conflicts of interests in the context of the Portuguese universal banking industry, or the existence of relevant back-end load cost which prevent investors from reacting. A high persistence of net investment flows was also noted. Our results are consistent with the idea that the financial groups with larger market shares have the capacity “to drive” their customers to funds with larger fees. This practice emerges as a non-transparent means of increasing prices.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.fep.up.pt/investigacao/workingpapers/06.02.09_WP204_alvesmendes.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 204.

as in new window
Length: 21 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:por:fepwps:204

Contact details of provider:
Postal: Rua Dr. Roberto Frias, 4200 PORTO
Phone: 351-22-5571100
Fax: 351-22-5505050
Email:
Web page: http://www.fep.up.pt/
More information through EDIRC

Related research

Keywords: Mutual Funds; Performance Reaction; Investor Behaviour; Small Markets and Regulation;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(3), pages 607-36, May-June.
  2. Serra, Ana Paula, 2000. "Country and industry factors in returns: evidence from emerging markets' stocks," Emerging Markets Review, Elsevier, Elsevier, vol. 1(2), pages 127-151, September.
  3. Susan E. K. Christoffersen, 2001. "Why Do Money Fund Managers Voluntarily Waive Their Fees?," Journal of Finance, American Finance Association, American Finance Association, vol. 56(3), pages 1117-1140, 06.
  4. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, American Finance Association, vol. 52(1), pages 57-82, March.
  5. William N. Goetzmann & Stephen J. Brown, 2005. "Performance Persistence," Yale School of Management Working Papers, Yale School of Management ysm451, Yale School of Management.
  6. Busse, Jeffrey A., 2001. "Another Look at Mutual Fund Tournaments," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(01), pages 53-73, March.
  7. Prem C. Jain & Joanna Shuang Wu, 2000. "Truth in Mutual Fund Advertising: Evidence on Future Performance and Fund Flows," Journal of Finance, American Finance Association, American Finance Association, vol. 55(2), pages 937-958, 04.
  8. Hendricks, Darryll & Patel, Jayendu & Zeckhauser, Richard, 1993. " Hot Hands in Mutual Funds: Short-Run Persistence of Relative Performance, 1974-1988," Journal of Finance, American Finance Association, American Finance Association, vol. 48(1), pages 93-130, March.
  9. Lu Zheng, 1999. "Is Money Smart? A Study of Mutual Fund Investors' Fund Selection Ability," Journal of Finance, American Finance Association, American Finance Association, vol. 54(3), pages 901-933, 06.
  10. Erik R. Sirri & Peter Tufano, 1998. "Costly Search and Mutual Fund Flows," Journal of Finance, American Finance Association, American Finance Association, vol. 53(5), pages 1589-1622, October.
  11. Pesaran, M.H. & Timmermann, A., 1990. "A Simple Non-Parametric Test Of Predictive Performance," Papers, California Los Angeles - Applied Econometrics 29, California Los Angeles - Applied Econometrics.
  12. Goetzmann, William N & Peles, Nadav, 1997. "Cognitive Dissonance and Mutual Fund Investors," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(2), pages 145-58, Summer.
  13. Chevalier, Judith & Ellison, Glenn, 1997. "Risk Taking by Mutual Funds as a Response to Incentives," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(6), pages 1167-1200, December.
  14. Ippolito, Richard A, 1992. "Consumer Reaction to Measures of Poor Quality: Evidence from the Mutual Fund Industry," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 35(1), pages 45-70, April.
  15. Carlos Alves & Victor Mendes, 2001. "Corporate Governance Policy and Company Performance: The Case of Portugal," FEP Working Papers 112, Universidade do Porto, Faculdade de Economia do Porto.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Carlos Alves & Victor Mendes, 2007. "Are mutual fund investors in jail?," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 17(16), pages 1301-1312.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:por:fepwps:204. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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