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Seasonal Asset Allocation: Evidence from Mutual Fund Flows

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  • Kamstra, Mark J.
  • Kramer, Lisa A.
  • Levi, Maurice D.
  • Wermers, Russ

Abstract

We analyze the flow of money between mutual fund categories, finding strong evidence of seasonality in investor risk aversion. Aggregate investor flow data reveal an investor preference for safe mutual funds in autumn and risky funds in spring. During September alone, outflows from equity funds average $13 billion, controlling for previously documented flow determinants (e.g., capital-gains overhang). This movement of large amounts of money between fund categories is correlated with seasonality in investor risk aversion, consistent with investors preferring safer (riskier) investments in autumn (spring). We find consistent evidence in Canada and also in Australia, where seasons are offset by 6 months.

Suggested Citation

  • Kamstra, Mark J. & Kramer, Lisa A. & Levi, Maurice D. & Wermers, Russ, 2017. "Seasonal Asset Allocation: Evidence from Mutual Fund Flows," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(1), pages 71-109, February.
    • Handle: RePEc:cup:jfinqa:v:52:y:2017:i:01:p:71-109_00
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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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