tailieunhanh - Consumer Interest Rates and Retail Mutual Fund Flows

In the absence of further guidance on the relative importance of the two argu- ments, our prior about the relative smartness of institutional versus individual money f lows remains regard to the direction ofmoney f lows, there are at least two reasons to believe that investors’ fund sells have a weaker as- sociation with future performance than their fund buys. First, the disposition effect discussed in Odean (1998) suggests that sell decisions are generally not optimallymade. Second, fund redemptions aremore likely than fund purchases to be due to factors unrelated to future performance, such as liquidity needs or taxes | Ilium I BANK OF CANADA L -L BANQUE DU CANADA Working Paper Document de travail 2012-39 Consumer Interest Rates and Retail Mutual Fund Flows by Jesus Sierra Bank of Canada Working Paper 2012-39 December 2012 Consumer Interest Rates and Retail Mutual Fund Flows by Jesus Sierra Financial Markets Department Bank of Canada Ottawa Ontario Canada K1A 0G9 sier@ Bank of Canada working papers are theoretical or empirical works-in-progress on subjects in economics and finance. The views expressed in this paper are those of the author. No responsibility for them should be attributed to the Bank of Canada. ISSN 1701-9397 2012 Bank of Canada Acknowledgements I would like to thank Antonio Diez de los Rios Roger Hallam Scott Hendry Jorge Abraham Cruz Lopez Jonathan Witmer and Bank of Canada Brown Bag seminar participants for helpful comments and suggestions Profr. Claude Francoeur at HEC Montréal for making the data on factor returns publicly available and Brooke Biscoe and Rico Leppard at FunData Inc. for help in obtaining the data on expense ratios. All errors are mine. .