Apoorva Javadekar
CAFRAL
Abstract:
The paper builds on a simple yet novel idea that the way investors react to the recent mutual fund performance depends largely upon the long-term historical performance of that fund. In particular, I find that investors react more actively to the funds recent performance in case of the funds with good performance history. I show that these effects are strongest for funds which are likely to attract attentive investors such as funds having more visibility or funds with high entry loads. Next, I show that investors who are less responsive to the fund performance are also less responsive to the changes in fund fees which suggest that \textit{investor inattention} rather than any other rational decision-making process that explains the sluggish capital flows. I build a model which shows how the concentration of attentive investors within fund rise with the historical performance which feeds into more reactive capital flows. I provide evidence that mutual funds are aware of the varying degree of investor responsiveness and they adjust their pricing and portfolio risk to maximize the revenue.
Date: September 7, 2017
Time: 11:30 A.M.
Venue:
Seminar Room No. 2
Indian Statistical Institute Delhi Centre,
7, S. J. S. Sansanwal Marg,
New Delhi-110016 (INDIA)
Location:
View Larger Map
CAFRAL
Abstract:
The paper builds on a simple yet novel idea that the way investors react to the recent mutual fund performance depends largely upon the long-term historical performance of that fund. In particular, I find that investors react more actively to the funds recent performance in case of the funds with good performance history. I show that these effects are strongest for funds which are likely to attract attentive investors such as funds having more visibility or funds with high entry loads. Next, I show that investors who are less responsive to the fund performance are also less responsive to the changes in fund fees which suggest that \textit{investor inattention} rather than any other rational decision-making process that explains the sluggish capital flows. I build a model which shows how the concentration of attentive investors within fund rise with the historical performance which feeds into more reactive capital flows. I provide evidence that mutual funds are aware of the varying degree of investor responsiveness and they adjust their pricing and portfolio risk to maximize the revenue.
Date: September 7, 2017
Time: 11:30 A.M.
Venue:
Seminar Room No. 2
Indian Statistical Institute Delhi Centre,
7, S. J. S. Sansanwal Marg,
New Delhi-110016 (INDIA)
Location:
View Larger Map
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