Martijn Boons, Tilburg University

Campus WU Vienna D3.0.225 12:30 - 13:30

Organizer WU Vienna

The Finance Brown Bag Seminar is held by the Institute for Finance, Banking and Insurance (WU Vienna) and the Vienna Graduate School of Finance (VGSF). It serves as a presentation platform for PhD students, faculty members, and visitors. An overview of BBS on the website of the Institute for Finance, Banking and Insurance.


Martijn Boons, Tilburg University

When do Investors Care About Fund Performance?

We revisit some of the most fundamental questions in the mutual fund literature using relatively high-frequency data on fund flows and returns. We show that weekly flows significantly respond to a single day of performance. More surprisingly, this flow-performance sensitivity is mainly driven by days with heightened investor attention, which we show to be days with unusually low market returns („bad days“) using a novel dataset of traffic to financial websites. Further, in contrast to existing evidence at lower frequencies, flows respond to both out- and underperformance on bad days. These bad day flows represent smart money, because bad day outperformance is persistent and contributes significantly to unconditional fund outperformance. In turn, this persistence reveals specific bad day skill that we argue to be different from general managerial skill.  Overall, the marginal fund investor at higher frequency rewards fund managers with specific bad day skill, which highlights the importance of studying the interaction between fund and market returns for understanding the mutual fund market.

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