Correction to: Is fund performance driven by flows into connected funds? spillover effects in the mutual fund industry

Mutual fund performance with learning across funds

The average level and cross-sectional variability of fund alphas are estimated from a large sample of mutual funds. This information is incorporated, along with the usual regression estimate of alpha, in a (roughly) precision-weighted average measure of individual fund performance. Substantial ‘‘learning across funds’’ is documented, with significant effects on investment decisions. In a Bayesi...

The MUTUAL FUND INDUSTRY

Persistence and Fund Flows of the Worst Performing Mutual Funds

We document that the observed persistence amongst the worst performing actively managed mutual funds is attributable to funds that have performed poorly both in the current and prior year. Consistent with the Berk and Green (2004) model, we demonstrate that this persistence results from an unwillingness of investors in these funds to respond to bad performance by withdrawing their capital. In c...

Mutual Funds, Part II: Fund Flows and Security Returns

T his study is the second in a two-part analysis of the mutual fund industry. The first part (Fortune 1997, referred to here as " Part I ") examined the basic structure of the industry and discussed the historical relationship between mutual fund flows and returns on both short-term and long-term financial instruments. That study ended with a discussion of the role that momentum investing by mu...

Individual investor mutual fund flows

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 exp...