Do after-tax returns affect mutual fund inflows?
This 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.
(This abstract was borrowed from another version of this item.)
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Joseph E. Stiglitz, 1983.
"Some Aspects of the Taxation of Capital Gains,"
NBER Working Papers
1094, National Bureau of Economic Research, Inc.
- Warther, Vincent A., 1995. "Aggregate mutual fund flows and security returns," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 209-235.
- Fama, Eugene F & French, Kenneth R, 1996. " Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
- Khorana, Ajay & Servaes, Henri, 1999. "The Determinants of Mutual Fund Starts," Review of Financial Studies, Society for Financial Studies, vol. 12(5), pages 1043-74.
- Joel M. Dickson & John B. Shoven, 1995. "Taxation and Mutual Funds: An Investor Perspective," NBER Chapters, in: Tax Policy and the Economy, Volume 9, pages 151-180 National Bureau of Economic Research, Inc.
- Moulton, Brent R, 1987. "Diagnostics for Group Effects in Regression Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 275-82, April.
- Jennifer Carpenter & Anthony Lynch, 1998.
"Survivorship Bias and Attrition Effects in Measures of Performance Persistence,"
New York University, Leonard N. Stern School Finance Department Working Paper Seires
98-077, New York University, Leonard N. Stern School of Business-.
- Carpenter, Jennifer N. & Lynch, Anthony W., 1999. "Survivorship bias and attrition effects in measures of performance persistence," Journal of Financial Economics, Elsevier, vol. 54(3), pages 337-374, December.
- Constantinides, George M., 1984.
"Optimal stock trading with personal taxes : Implications for prices and the abnormal January returns,"
Journal of Financial Economics,
Elsevier, vol. 13(1), pages 65-89, March.
- George M. Constantinides, 1983. "Optimal Stock Trading with Personal Taxes: Implications for Prices and the Abnormal January Returns," NBER Working Papers 1176, National Bureau of Economic Research, Inc.
- Elton, Edwin J & Gruber, Martin J & Blake, Christopher R, 1996. "Survivorship Bias and Mutual Fund Performance," Review of Financial Studies, Society for Financial Studies, vol. 9(4), pages 1097-1120.
- Chevalier, Judith & Ellison, Glenn, 1997.
"Risk Taking by Mutual Funds as a Response to Incentives,"
Journal of Political Economy,
University of Chicago Press, vol. 105(6), pages 1167-1200, December.
- Judith A. Chevalier & Glenn D. Ellison, 1995. "Risk Taking by Mutual Funds as a Response to Incentives," NBER Working Papers 5234, National Bureau of Economic Research, Inc.
- 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.
- Poterba, James M., 2002.
"Taxation, risk-taking, and household portfolio behavior,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 17, pages 1109-1171
- James M. Poterba, 2001. "Taxation, Risk-Taking, and Household Portfolio Behavior," NBER Working Papers 8340, National Bureau of Economic Research, Inc.
- 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.
- Barclay, Michael J. & Pearson, Neil D. & Weisbach, Michael S., 1998. "Open-end mutual funds and capital-gains taxes," Journal of Financial Economics, Elsevier, vol. 49(1), pages 3-43, July.
- Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
- Harjeet S Bhabra & Upinder S Dhillon & Gabriel G Ramirez, 1999. "A November Effect? Revisiting the Tax-Loss-Selling Hypothesis," Financial Management, Financial Management Association, vol. 28(4), Winter.
- Gibson, Scott & Safieddine, Assem & Titman, Sheridan, 2000. "Tax-Motivated Trading and Price Pressure: An Analysis of Mutual Fund Holdings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(03), pages 369-386, September.
- 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.
When requesting a correction, please mention this item's handle: RePEc:eee:jfinec:v:63:y:2002:i:3:p:381-414. 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: (Zhang, Lei)
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.