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Individual Investor Mutual-Fund Flows

Author

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  • Zoran Ivkovich
  • Scott Weisbenner

Abstract

This paper studies the relation between individuals' mutual fund flows and fund characteristics, establishing three key results. First, consistent with tax motivations, individual investors are reluctant to sell mutual funds that have appreciated in value and are willing to sell losing funds. Second, individuals pay attention to investment costs as redemption decisions are sensitive to both expense ratios and loads. Third, individuals' fund-level inflows and outflows are sensitive to performance, but in different ways. Inflows are related only to "relative" performance, suggesting that new money chases the best performers in an objective. Outflows are related only to "absolute" fund performance, the relevant benchmark for taxes.

Suggested Citation

  • Zoran Ivkovich & Scott Weisbenner, 2008. "Individual Investor Mutual-Fund Flows," NBER Working Papers 14583, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14583
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    File URL: http://www.nber.org/papers/w14583.pdf
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    References listed on IDEAS

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    4. Zoran Ivković & James Poterba & Scott Weisbenner, 2005. "Tax-Motivated Trading by Individual Investors," American Economic Review, American Economic Association, vol. 95(5), pages 1605-1630, December.
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    More about this item

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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