Mutual fund flows and investor returns: An empirical examination of fund investor timing ability

Geoffrey C. Friesen, Travis R.A. Sapp

Research output: Contribution to journalArticlepeer-review

94 Scopus citations

Abstract

We examine the timing ability of mutual fund investors using cash flow data at the individual fund level. Over 1991-2004 equity fund investor timing decisions reduce fund investor average returns by 1.56% annually. Underperformance due to poor timing is greater in load funds and funds with relatively large risk-adjusted returns. In particular, the magnitude of investor underperformance due to poor timing largely offsets the risk-adjusted alpha gains offered by good-performing funds. Investors in both actively managed funds and index funds exhibit poor investment timing. We demonstrate that our empirical results are consistent with investor return-chasing behavior.

Original languageEnglish (US)
Pages (from-to)2796-2816
Number of pages21
JournalJournal of Banking and Finance
Volume31
Issue number9
DOIs
StatePublished - Sep 2007

Keywords

  • Fund cash flows
  • Fund clienteles
  • Investor timing
  • Mutual fund performance

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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