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Family Matters: The Performance Flow Relationship in the Mutual Fund Industry

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Author Info

  • Alexander Kempf

    (University of Cologne - Department of Finance)

  • Stefan Ruenzi

    (University of Cologne - Department of Finance)

Abstract

The relationship between the performance of mutual funds and their subsequent growth is examined. The focus of our paper is on the influence of the position of a fund within its family. So far only the influence of the position of a fund within its segment on its subsequent inflows has been considered. Our empirical study of the US mutual fund market shows that fund growth depends on the relative position of a fund within its segment AND within its family. This leads to important incentives for fund managers.

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File URL: http://128.118.178.162/eps/fin/papers/0404/0404012.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0404012.

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Length: 26 pages
Date of creation: 22 Apr 2004
Date of revision: 26 May 2004
Handle: RePEc:wpa:wuwpfi:0404012

Note: Type of Document - pdf; pages: 26. 26 pages, pdf, prepared from pdftex
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Web page: http://128.118.178.162

Related research

Keywords: Mutual Funds; Fund Families; Performance Flow Relationship; Intra-Firm Competition;

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References

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  1. Bergstresser, Daniel & Poterba, James, 2002. "Do after-tax returns affect mutual fund inflows?," Journal of Financial Economics, Elsevier, vol. 63(3), pages 381-414, March.
  2. 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, vol. 35(1), pages 45-70, April.
  3. Chevalier, J. & Ellison, G., 1996. "Risk Taking by Mutual Funds as a Response to Incentives," Working papers 96-3, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Harless, David W. & Peterson, Steven P., 1998. "Investor behavior and the persistence of poorly-performing mutual funds," Journal of Economic Behavior & Organization, Elsevier, vol. 37(3), pages 257-276, November.
  5. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
  6. Woerheide, Walt, 1982. "Investor Response to Suggested Criteria for the Selection of Mutual Funds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(01), pages 129-137, March.
  7. Diane Del Guercio & Paula A. Tkac, 2001. "Star power: the effect of Morningstar ratings on mutual fund flows," Working Paper 2001-15, Federal Reserve Bank of Atlanta.
  8. 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.
  9. Fant, L Franklin & O'Neal, Edward S, 2000. "Temporal Changes in the Determinants of Mutual Fund Flows," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 23(3), pages 353-71, Fall.
  10. Berkowitz, Michael K. & Kotowitz, Yehuda, 2000. "Investor risk evaluation in the determination of management incentives in the mutual fund industry," Journal of Financial Markets, Elsevier, vol. 3(4), pages 365-387, November.
  11. Diane Del Guercio & Paula A. Tkac, 2000. "The determinants of the flow of funds of managed portfolios: mutual funds versus pension funds," Working Paper 2000-21, Federal Reserve Bank of Atlanta.
  12. Erik R. Sirri & Peter Tufano, 1998. "Costly Search and Mutual Fund Flows," Journal of Finance, American Finance Association, vol. 53(5), pages 1589-1622, October.
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Citations

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Cited by:
  1. Alexander Kempf & Stefan Ruenzi, 2008. "Tournaments in Mutual-Fund Families," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 1013-1036, April.
  2. Stefan Ruenzi, 2004. "Mutual Fund Growth in Standard and Specialist Market Segments," Finance 0406005, EconWPA, revised 27 Jun 2004.
  3. Martí Ballester, Carmen Pilar, 2013. "Determinants of equity pension plan flows," Economics Discussion Papers 2013-15, Kiel Institute for the World Economy.
  4. Ber, Silke & Kempf, Alexander & Ruenzi, Stefan, 2005. "Determinanten der Mittelzuflüsse bei deutschen Aktienfonds," CFR Working Papers 05-11, University of Cologne, Centre for Financial Research (CFR).
  5. Kempf, Alexander & Ruenzi, Stefan, 2005. "Status quo bias and the number of alternatives: An empirical illustration from the mutual fund industry," CFR Working Papers 05-07, University of Cologne, Centre for Financial Research (CFR).
  6. Rong Lu & Baizhu Chen & Longbing Xu & Xinhou Xie, 2008. "Redemption puzzle of open-end fund market in China," Psychometrika, Springer, vol. 3(3), pages 430-450, September.
  7. Carmen Pilar Martí Ballester, 2014. "Determinants of equity pension plan flows," Estudios de Economia, University of Chile, Department of Economics, vol. 41(1 Year 20), pages 125-148, June.

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