Do fund flows moderate persistence? Evidence from a global study. Issue 7 (3rd May 2021)

• Record Type: Journal Article
• Authors: Miguel, Antonio F.
• Is Part Of: European journal of finance. Volume 27:Issue 7(2021)
• Page Start: 635
• Page End: 654
• Publication Date: 2021-05-03
• Subjects: Mutual fund persistence -- fund flows -- returns to scale -- Berk and Green model; G15 -- G23; Finance -- Periodicals; Finance -- Europe -- Periodicals; International finance -- Periodicals; 332.094
• DOI: 10.1080/1351847X.2020.1830820
• Languages: English
• ISSNs: 1351-847X

Abstract

Abstract : We investigate whether fund flows eliminate future abnormal performance and persistence as in Berk and Green (2004. "Mutual Fund Flows and Performance in Rational Markets." Journal of Political Economy 112: 1269–1295) using a sample of open-end domestic equity mutual funds from 32 countries. We show that flows have only a small moderating effect on persistence even in the United States, where fund industry conditions most closely resemble the Berk and Green assumptions. In fact, we find that most countries do not have decreasing returns to scale in fund management and, as a result, flows have limited impact on mutual fund performance persistence.