Changes in Mutual Fund Flows and Managerial Incentives

80 Pages Posted: 22 Mar 2010 Last revised: 22 Dec 2019

See all articles by Min S. Kim

Min S. Kim

Boston University; Financial Research Network (FIRN)

Date Written: December 18, 2019

Abstract

Fund flows become less sensitive to high performance after 2000, thereby decreasing convexity of the flow-performance relationship. I present novel evidence on the effects of aggregate performance on convexity of the flow-performance relationship. Flows to high-performing funds decrease when the average performance is high and when the performance dispersion is low. A decrease in convexity of the relationship is associated with a decrease in managers' risk shifting. Low-performers undertake more risk toward the end of the year before 2000, but not after 2000. Further, low-performers' risk shifting lessens when the average performance is high and the performance dispersion is low.

Keywords: mutual fund, flow-performance relationship, risk shifting, average performance, performance dispersion

JEL Classification: C14, G10, G20, G23

Suggested Citation

Kim, Min S., Changes in Mutual Fund Flows and Managerial Incentives (December 18, 2019). Available at SSRN: https://ssrn.com/abstract=1573051 or http://dx.doi.org/10.2139/ssrn.1573051

Min S. Kim (Contact Author)

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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