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The Exclamation Mark of Cain: Risk Salience and Mutual Fund Flows

Author

Listed:
  • Yevgeny Mugerman

    (Bar-Ilan University)

  • Nadav Steinberg

    (Bank of Israel)

  • Zvi Wiener

    (The Hebrew University of Jerusalem)

Abstract

We study a regulation that increased mutual funds' risk salience through name change. Using daily fund flow data and several identification strategies, we find that requiring certain mutual funds to affix an exclamation mark ("!") to their names caused a statistically and economically significant decline in their net flows, with a larger effect on fund inflows than outflows. The exclamation mark’s impact stems from retail investors, both those that seek financial advice and those that invest independently. Mutual funds “defamed” by the exclamation mark designation actually increased their exposure to the particular risk highlighted by the regulator.

Suggested Citation

  • Yevgeny Mugerman & Nadav Steinberg & Zvi Wiener, 2019. "The Exclamation Mark of Cain: Risk Salience and Mutual Fund Flows," Bank of Israel Working Papers 2019.09, Bank of Israel.
    • Handle: RePEc:boi:wpaper:2019.09
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    Cited by:

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    2. Abudy, Menachem (Meni) & Shust, Efrat, 2023. "Does market design contribute to market stability? Indications from a corporate bond exchange during the COVID-19 crisis," Journal of Economics and Business, Elsevier, vol. 123(C).
    3. Abudy, Menachem Meni, 2020. "Retail investors’ trading and stock market liquidity," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    4. Gavious, Ilanit & Jacoby, Tomer & Milo, Orit, 2023. "Economic consequences of building a cross-country barrier among alternative policies to deal with unauthorized immigration," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
    5. Noam Ben-Ze'ev, 2023. "Drivers of Flows-Performance Sensitivity in Mutual Funds," Bank of Israel Working Papers 2023.06, Bank of Israel.

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    More about this item

    Keywords

    Mutual Funds; Regulation; Investor Attention; Investor Protection;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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