2020 applicants
Event

Research Seminar: What is Mutual Fund Flow?

Using a sample of mutual funds that invest exclusively in the U.S., we distinguish between different types of mutual fund inflows and outflows.

Professor Douglas Cumming is Professor of Finance and Entrepreneurship at the Schulich School of Business, York University, Ontario.

Abstract

Using a sample of mutual funds that invest exclusively in the U.S., we distinguish between different types of mutual fund inflows and outflows: switches, pre-authorised contributions, systematic withdrawal plans, reinvestments, and distributions to unit-holders.

We find that different types of flows exhibit distinct characteristics to aggregate fund flow with respect to fund fees and past performance, suggesting that an aggregation of different types of flow in any form, as done to different degrees in all prior studies on mutual fund flow, gives rise to miss-estimates of economic and statistical significance of factors that influence flow.

We further argue that the positive correlation between new purchases and switch-out reflects information asymmetry between incoming investors and current unitholders.

This information asymmetry is more common when fund series are sold through dealers or brokers.

We further show that this information asymmetry, attributed to biased purchase advice, is negatively associated with fund performance.

Professor Douglas Cumming Bio

He is a Co-Editor of the Journal of Corporate Finance and of Entrepreneurship Theory and Practice, and has published over 150 articles in leading refereed academic journals in finance, management, and law and economics, such as the Journal of Financial Economics, Review of Financial Studies, Journal of International Business Studies and the Journal Financial and Quantitative Analysis.

He is the coauthor of Crowdfunding: Cases and Statistics (Elsevier Science Academic Press, 2017), Venture Capital and Private Equity Contracting (Elsevier Academic Press, 2013), and Hedge Fund Structure, Regulation and Performance around the World (Oxford University Press, 2013).

He also recently co-edited the Oxford Handbook of IPOs (Oxford University Press, 2017) and the Oxford Handbook of Sovereign Wealth Funds (Oxford University Press, 2016).

His work has been reviewed in numerous media outlets, including The Economist, Canadian Business, the National Post, and The New Yorker.