Can Mutual Fund Investors Distinguish Good from Bad Managers?

Teodor Dyakov, Marno Verbeek

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Mutual fund flows respond significantly to the return gap, which captures information about unobserved actions of mutual funds and predicts future performance. The sensitivity of fund flows to the return gap is: (i) strong and positive; (ii) increasing with investor sophistication; (iii) highly nonlinear; and (iv) decreasing with the informativeness of past fund returns. On average, the response of investors to the return gap enhances their performance. Our findings suggest there is a sophisticated mass of investors who can distinguish good from bad managers using information that may not be directly inferred from standard performance indicators.

LanguageEnglish
Pages1-36
Number of pages36
JournalInternational Review of Finance
DOIs
Publication statusE-pub ahead of print - 25 Mar 2018

Fingerprint

Investors
Mutual funds
Managers
Investor sophistication
Mutual fund flows
Flow of funds
Performance indicators
Informativeness

Cite this

@article{0a533ddd3e194846b4bd26020a55cbe2,
title = "Can Mutual Fund Investors Distinguish Good from Bad Managers?",
abstract = "Mutual fund flows respond significantly to the return gap, which captures information about unobserved actions of mutual funds and predicts future performance. The sensitivity of fund flows to the return gap is: (i) strong and positive; (ii) increasing with investor sophistication; (iii) highly nonlinear; and (iv) decreasing with the informativeness of past fund returns. On average, the response of investors to the return gap enhances their performance. Our findings suggest there is a sophisticated mass of investors who can distinguish good from bad managers using information that may not be directly inferred from standard performance indicators.",
author = "Teodor Dyakov and Marno Verbeek",
year = "2018",
month = "3",
day = "25",
doi = "10.1111/irfi.12187",
language = "English",
pages = "1--36",
journal = "International Review of Finance",
issn = "1369-412X",
publisher = "John Wiley and Sons Ltd",

}

Can Mutual Fund Investors Distinguish Good from Bad Managers? / Dyakov, Teodor; Verbeek, Marno.

In: International Review of Finance, 25.03.2018, p. 1-36.

Research output: Contribution to JournalArticleAcademicpeer-review

TY - JOUR

T1 - Can Mutual Fund Investors Distinguish Good from Bad Managers?

AU - Dyakov, Teodor

AU - Verbeek, Marno

PY - 2018/3/25

Y1 - 2018/3/25

N2 - Mutual fund flows respond significantly to the return gap, which captures information about unobserved actions of mutual funds and predicts future performance. The sensitivity of fund flows to the return gap is: (i) strong and positive; (ii) increasing with investor sophistication; (iii) highly nonlinear; and (iv) decreasing with the informativeness of past fund returns. On average, the response of investors to the return gap enhances their performance. Our findings suggest there is a sophisticated mass of investors who can distinguish good from bad managers using information that may not be directly inferred from standard performance indicators.

AB - Mutual fund flows respond significantly to the return gap, which captures information about unobserved actions of mutual funds and predicts future performance. The sensitivity of fund flows to the return gap is: (i) strong and positive; (ii) increasing with investor sophistication; (iii) highly nonlinear; and (iv) decreasing with the informativeness of past fund returns. On average, the response of investors to the return gap enhances their performance. Our findings suggest there is a sophisticated mass of investors who can distinguish good from bad managers using information that may not be directly inferred from standard performance indicators.

UR - http://www.scopus.com/inward/record.url?scp=85044360693&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85044360693&partnerID=8YFLogxK

U2 - 10.1111/irfi.12187

DO - 10.1111/irfi.12187

M3 - Article

SP - 1

EP - 36

JO - International Review of Finance

T2 - International Review of Finance

JF - International Review of Finance

SN - 1369-412X

ER -