재무연구 제 권 호 (2014년 5월)
Asian Review of Financial Research, Vol., No..
pp.269~300
pp.269~300
How do fund flows affect performance? A revisit of smart money effect with monthly inflows and outflows
Yeonjeong Ha Korea Advanced Institute of Science and Technology
Hyeongseok Kang Korea Advanced Institute of Science and Technology
Tongsuk Kim Korea Advanced Institute of Science and Technology
Heewoo Park Korea Advanced Institute of Science and Technology
Gruber (1996) and Zheng (1999) examine the relationship between fund cash flow and subsequent fund performance using quarterly net flow and show the evidence of smart money effect. However, Sapp and Tiwari (2004) show smart money effect is wholly explained by momentum factor and Keswani and Stolin (2008) emphasize the frequency of cash flow data. This study investigates the relationship between fund cash flow and performance using monthly net flow, inflow, and outflow. We find the evidence of smart money effect after controlling for the momentum factor. Especially, cash flow into small funds leads to positive abnormal returns significantly but cash flow out of large funds otherwise makes negative abnormal returns. The results that differ from the previous studies come from the frequency of cash flow data and the period of analysis.
Yeonjeong Ha
Hyeongseok Kang
Tongsuk Kim
Heewoo Park
Gruber (1996) and Zheng (1999) examine the relationship between fund cash flow and subsequent fund performance using quarterly net flow and show the evidence of smart money effect. However, Sapp and Tiwari (2004) show smart money effect is wholly explained by momentum factor and Keswani and Stolin (2008) emphasize the frequency of cash flow data. This study investigates the relationship between fund cash flow and performance using monthly net flow, inflow, and outflow. We find the evidence of smart money effect after controlling for the momentum factor. Especially, cash flow into small funds leads to positive abnormal returns significantly but cash flow out of large funds otherwise makes negative abnormal returns. The results that differ from the previous studies come from the frequency of cash flow data and the period of analysis.
