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Chasing Their Tails: Inflow Momentum and Yield Chasing among Provident Fund Investors in Israel

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  • Nadav Steinberg

    (Bank of Israel)

  • Yehuda Porath

    (Bank of Israel)

Abstract

This paper examines the short-run relationship between provident fund yields and investment in provident funds. Using Panel VAR regressions, we find that there is short-term momentum in provident fund yields and flows and investors engage in short-term yield chasing. We also find positive effect of flows on short term yields. We reinforce these conclusions by dividing our sample to pre-crisis, crisis and post-crisis estimation and confirming our main results in the sub-periods. Additional evidence seems to suggest that investor yield chasing is affected by fund risk and management fees.

Suggested Citation

  • Nadav Steinberg & Yehuda Porath, 2011. "Chasing Their Tails: Inflow Momentum and Yield Chasing among Provident Fund Investors in Israel," Bank of Israel Working Papers 2011.07, Bank of Israel.
    • Handle: RePEc:boi:wpaper:2011.07
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    Cited by:

    1. Dariusz Filip, 2021. "A Review of Main Strands on the Flow-Performance Relationship of Mutual Funds," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 7(3), pages 245-256, July.
    2. Maya Shaton, 2017. "The Display of Information and Household Investment Behavior," Finance and Economics Discussion Series 2017-043, Board of Governors of the Federal Reserve System (U.S.).
    3. Hamdani, Assaf & Kandel, Eugene & Mugerman, Yevgeny & Yafeh, Yishay, 2017. "Incentive Fees and Competition in Pension Funds: Evidence from a Regulatory Experiment," Journal of Law, Finance, and Accounting, now publishers, vol. 2(1), pages 49-86, June.
    4. Yafeh, Yishay & Kandel, Eugene & Hamdani, Assaf & Mugerman, Yevgeny, 2015. "Incentive Fees and Competition in Pension Funds: Evidence from a Regulatory Experiment in Israel," CEPR Discussion Papers 10911, C.E.P.R. Discussion Papers.

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