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On the usability of synthetic measures of mutual fund net-flows

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  • Ber, Silke
  • Ruenzi, Stefan

Abstract

Due to a lack of data availability, numerous empirical studies on mutual fund flows (e.g. Sirri/Tufano (1998)) analyze synthetically derived flow measures. We show how good these measures can explain actual flows. We compare the measures suggested in the literature with the actual net-flows of all German equity mutual funds. Our results show the appropriateness of the synthetic measures used in previous studies. Inference about the influence of past performance on flows is not biased by using synthetic instead of actual measures of fund flows. Thus, we offer a justification for the use of synthetic measures in performance flow studies.

Suggested Citation

  • Ber, Silke & Ruenzi, Stefan, 2006. "On the usability of synthetic measures of mutual fund net-flows," CFR Working Papers 06-05, University of Cologne, Centre for Financial Research (CFR).
  • Handle: RePEc:zbw:cfrwps:0605
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    References listed on IDEAS

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    1. Diane Del Guercio & Paula A. Tkac, 2000. "The determinants of the flow of funds of managed portfolios: mutual funds versus pension funds," FRB Atlanta Working Paper 2000-21, Federal Reserve Bank of Atlanta.
    2. 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.
    3. Edwin J. Elton & Martin J. Gruber & Jeffrey A. Busse, 2004. "Are Investors Rational? Choices among Index Funds," Journal of Finance, American Finance Association, vol. 59(1), pages 261-288, February.
    4. 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.
    5. L. Franklin Fant & Edward S. O'Neal, 2000. "Temporal Changes In The Determinants Of Mutual Fund Flows," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 23(3), pages 353-371, September.
    6. Michael J. Cooper & Huseyin Gulen & P. Raghavendra Rau, 2005. "Changing Names with Style: Mutual Fund Name Changes and Their Effects on Fund Flows," Journal of Finance, American Finance Association, vol. 60(6), pages 2825-2858, December.
    7. Deaves, Richard, 2004. "Data-conditioning biases, performance, persistence and flows: The case of Canadian equity funds," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 673-694, March.
    8. Fant, L Franklin & O'Neal, Edward S, 2000. "Temporal Changes in the Determinants of Mutual Fund Flows," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 23(3), pages 353-371, Fall.
    9. Brad M. Barber & Terrance Odean & Lu Zheng, 2005. "Out of Sight, Out of Mind: The Effects of Expenses on Mutual Fund Flows," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2095-2120, November.
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    Cited by:

    1. Friesen, Geoffrey C. & Sapp, Travis R.A., 2007. "Mutual fund flows and investor returns: An empirical examination of fund investor timing ability," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2796-2816, September.
    2. Galagedera, Don U.A. & Watson, John & Premachandra, I.M. & Chen, Yao, 2016. "Modeling leakage in two-stage DEA models: An application to US mutual fund families," Omega, Elsevier, vol. 61(C), pages 62-77.
    3. Linh Tran Dieu, 2015. "A Comparison of Bank and Non-bank Funds in the French Market," Journal of Financial Services Research, Springer;Western Finance Association, vol. 47(3), pages 273-294, June.

    More about this item

    Keywords

    Mutual Funds; Performance Flow Relationship; Synthetic Flow Measures; Net-Flows;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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