IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v77y2025ics1544612325002454.html
   My bibliography  Save this article

The “Betting” behavior of mutual fund families

Author

Listed:
  • Wu, Yanran
  • Meng, Lili

Abstract

In a world where investors often gamble on the next “big win,” this study exposes the hidden motives and conflicts of interest driving mutual fund families to adopt lottery-like stock strategies. Using a sample of Chinese open-end mutual funds from 2004 to 2022, we find that fund families engage in “betting” by encouraging most, if not all, of their affiliated funds to pursue aggressive lottery-based investments. Although Chinese fund investors do not exhibit a distinct preference for lottery-like stocks, they do chase short-term performance. Our findings suggest that whether fund families can boost fund inflows through a lottery-based strategy hinges on their ability to deliver strong performance. However, fund investors do not hold the entire family of funds, and the performance of individual funds reverses in the latter half of the year—even for those within the most aggressive fund families. As a result, while fund families secure a “double win,” the associated risks and potential losses are ultimately borne by the investors.

Suggested Citation

  • Wu, Yanran & Meng, Lili, 2025. "The “Betting” behavior of mutual fund families," Finance Research Letters, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:finlet:v:77:y:2025:i:c:s1544612325002454
    DOI: 10.1016/j.frl.2025.106981
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612325002454
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2025.106981?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Mutual fund families; Lottery strategies; Performance; Fund flows; Conflicts of interest; Availability bias;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G40 - Financial Economics - - Behavioral Finance - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:77:y:2025:i:c:s1544612325002454. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.