Equity Fund Flows and Performance around Economic Recessions

Abstract

The relation between net fund flows and performance is examined around the two most recent U.S. economic recessions for U.S. equity funds. Post-recessionary period net fund flows are positively (negatively) correlated with absolute (peer-relative) performance for the early 2000s recession, and with absolute and peer-relative performance for the Great Recession (the most recent one) according to nonparametric measures. Empirical copulas in the extreme left tails indicate a positive dependence for the early 2000s recession, and independence for the Great Recession between performance and net fund flows.