Behavior Of Mutual Fund Investors Research Articles

Taking matters into their own hands: How Investors' stock preferences affect mutual fund flows in China

We examine the impact of investors' stock preferences in mutual funds' portfolios on fund flows in China. Our results indicate that mutual funds with an investment style consistent with individual investors' stock preferences have higher fund flow. We find that it affects only individual investors' fund flow, not institutional investors' fund flow. This impact is greater during periods of low economic policy uncertainty or high investor sentiment. Moreover, this impact is reduced with larger fund size or longer fund age. The reasonable explanation is that investors infer fund managers' skills by analyzing the stocks in the fund's portfolio. This explanation is further validated by the results using index funds as the control group. Our findings challenge the assumption that mutual fund investors fully delegate decisions to professionals. Further analysis reveals there is no significant correlation between these preferences and future returns. Our findings contribute to the study of mutual fund investor behavior from a fresh perspective.

INVESTORS ATTITUDE TOWARDS ONLINE AND OFFLINE TRADING OF MUTUAL FUNDS

Mutual fund as an investment avenue provides a platform to the investor who do not want to take high risk on their hard earned investment. In India, mutual fund industry is growing rapidly and this industry has emerged as an important segment of financial market of India, especially in channelizing and mobilizing the savings of millions of individuals into the investment in equity and debt instruments. Mutual fund investment is less risky than investing directly in stocks and is therefore a safer option for risk averse investor. A competent fund manager should analyze investor behavior, perception, and attitude and understand their needs and expectations to gear up the performance to meet investor expectations and requirements. Investment in mutual fund is affected by the attitude of investors and hence the objective of the study is to identify the investor's attitude on mutual fund as an investment avenue and the major findings reveal the factors that influence buying behavior of mutual fund investors.

Determinants of Investment Behavior of Investors towards Mutual Funds – A Study

The purpose of this paper was to provide empirical evidence on investor behavior towards mutual funds by collecting into account its relationship with age, education, and occupation. A questionnaire was used to collect data from 100 mutual fund investors, and 176 questionnaires were used for the analysis. Furthermore, the simple sampling technique was used to collect data from various locations in Warangal. The findings provide better information and guidance to investors and policymakers on the factors that influence mutual fund investor behavior.

Modifying Theory of Reasoned Action to Determine Online Mutual Fund Investor Behavior

Market penetration for mutual fund investments is still very low compared to other investment instruments such as deposits, gold, property, stocks, and peer-to-peer lending. Thus, the opportunity for mutual fund investment to develop in Indonesia is still very large. This study was conducted to determine what factors influence the behavior of online mutual fund investors by modifying the theory of reason action. The factors used to measure the behavior of online mutual fund investors are investor attitudes, subjective norms, financial literacy, financial performance, and investment intentions. The survey was conducted online to respondents from various regions in Indonesia. Sampling of 1117 respondents using the purposive sampling method. The results showed that partially investor attitudes, subjective norms, financial literacy, financial performance have a positive and significant effect on investment intentions. Investment intention as a mediating variable has a positive and significant relationship to consumer behavior. The results of this study are expected to be used by mutual fund sellers who are expected to be able to implement effective marketing strategies that can increase their managed funds and increase the number of online mutual fund customers in Indonesia, as well as increase the attractiveness of these mutual funds.

Determinants of Investment Behavior in Mutual Funds: Evidence From Pakistan.

This paper aimed to provide empirical evidence on the behavior of the investor toward mutual funds by considering its relationship with risk perception (RP), return perception (Return P), investment criteria (IC), mutual fund awareness (MFA), and financial literacy (FL). Data were collected using a questionnaire from 500 mutual fund investors, from which 460 questionnaires were used for the analysis. In addition, the snowball sampling technique was used to collect data from different cities in Pakistan. The result showed that RP, Return P, and MFA are insignificant and negatively affect the behavior of mutual fund investors. Investment criteria have a negative and significant effect on the behavior of mutual fund investors. Financial literacy has a positive and insignificant effect on the behavior of mutual fund investors. The results provide better information and guidance to investors and policymakers on the factors that affect the behavior of mutual fund investors.

Investors Preference for Mutual Fund Investment in Oman

The research study was based on primary as well as secondary data, however primary data collected was given more importance since it is an overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem. It also helps in collecting the vital information that is required by the top management to assist them for better decision making both days to day decision and critical ones. This study has attempted to understand the financial behavior of Mutual Fund investors in connection with the preferences of Brand (AMC), Products, and Channels etc. Many people do not have invested in mutual fund due to a lack of awareness although they have money to invest. As the awareness and income are growing the number of mutual funds investors are also growing. “Brand” plays an important role in investment. People invest in those companies where they have faith or they are well known for them. There are many AMCs in Salalah, Oman but only some are performing well due to Brand awareness. Distribution channels are also important for investment in a mutual fund. Banks are the most preferred channel for investment in a mutual fund. They can change investors’ mind from one investment option to others. Many investors directly invest their money through AMC.

Mutual fund investment decisions of investors in Coimbatore city, Tamil Nadu

Financial investment opportunities for investors include bank deposits, corporate bonds, gold, real estate, stocks and mutual funds. It is sensible to assume that a typical investor wants not only good return on investment but also to minimize risk. Mutual funds offer an opening to an investor with feasibly an optimal investment opportunity to invest in diversified and professionally managed basket of securities relatively at a low cost. In this context the present study was proposed with an objective of finding the investment decision making among mutual fund investors. Coimbatore city was purposively selected due to the presence of large number of asset management companies (AMCs) with different financial instruments and huge investors. Among 25 AMCs in Coimbatore city six were selected based on business potential. Ten samples were drawn from each AMC that made a total sample size of 60. Primary data were collected using well-structured interview schedule. Percentage analysis was used to analyze the socio-economic profile of respondents and chi-square test to analyze the investment decision making behavior of mutual fund investors. Results of the study indicated that majority of the investors were males in the age group of 26 to 40 years, graduates, married, doing private job and in the income group of Rs 2.5 to 5 lakh per annum. Chi-square analysis revealed that there was a significant relationship between occupation and type of mutual fund scheme opted by the investors. There was a significant association between occupation and objective of investment decision made. It was inferred that investors had been expecting their return from mutual fund investments according to their level of risk observed.

The Economic Impact of Mutual Fund Investor Behaviors

This study analyzes how equity mutual fund investor behavior has changed over time, and the associated impact on investor returns. First, we find that from 1991-2016 investor return-chasing behavior declined and more recently disappeared, while investor flows have become more sensitive to expenses, past risk and alpha. We also present evidence that these changes correspond to changes in word usage and attention to alphas, past returns and fund expenses in the popular press and academic journals. Investors now pay more attention to fund characteristics that have the potential to improve future performance (e.g. risk, alpha and expenses), and less attention to characteristics that don’t (e.g. past returns). Second, we examine the effect of increased attention to fund alphas on investors’ realized performance. We confirm the well-documented positive persistence of alpha, but note that this positive cross-sectional persistence in alphas measures the net effect of two distinct phenomena: the cross-sectional variation in average alphas across funds (Harvey and Liu, 2018), and the time-series autocorrelation of alpha within each fund. Both properties are independently relevant: fund selection relates to investors’ ability to exploit variation in alphas across funds; timing relates to the ability to exploit the autocorrelation patterns within a given fund. We show that at the fund level, alphas have strong negative serial correlation. Lastly we decompose total mutual fund investor Performance Gap into fund selection and timing components, then further decompose each of these into pieces related to each individual determinant of the cashflow, so that we can determine how much each individual behavior contributes to both fund selection and timing. Even though investors realize some benefit from selecting high-alpha funds (smart money), they time their cash flows very poorly by investing in those funds after periods with the highest realized alphas (dumb money). The dumb money effect dominates, and we show that chasing alphas reduces investor returns by three times as much as chasing past returns. Overall, our results suggest that mutual fund investors have learned that alpha is important, but have not yet learned how to effectively integrate this knowledge into their investment decisions.

Investment Decisions Under Ambiguity: Evidence from Mutual Fund Investor Behavior

We provide novel evidence on the role of ambiguity aversion in determining the response of mutual fund investors to fund performance. Our analysis is motivated by theoretical models of decision making by ambiguity-averse investors. A key implication of the models is that when investors face information signals of uncertain quality, they place a greater weight on the worst signal. We find strong empirical support for this prediction in the form of heightened sensitivity of investor fund flows to the worst performance measure across multiple horizons. This effect is particularly pronounced for retail funds in contrast to institutional funds. This paper was accepted by Neng Wang, finance.

Mutual Fund Style Volatility and Fund Flows

Mutual fund managers often follow investment strategies that result in a drift of their investment styles over time. This paper empirically examines whether the behavior of mutual fund investors is affected by this style drift using a comprehensive sample of U.S. actively-managed equity mutual funds from 1985 to 2013. I find a significant positive relationship between the style volatility and the subsequent fund flows to mutual funds. Further, this relationship is less pronounced for funds with superior past performance. Finally, fund style volatility has a dampening effect on the flow-performance relationship, as performance is perceived as a less informative signal of investment ability for fund managers who follow inconsistent styles over time.

STRATEGY FORMULATION FOR DEVELOPING BATIK TULIS

Investment decisions under risk may lead investors to behave irrationally in managing their portfolio investments. This study aims to examine the behavior of mutual fund investors in making investment decisions during the mutual fund market crisis in Indonesia in 2005. Specifically, this study examines the effect of investment motives and investment benefits on mutual fund investment performance by considering the fund redemption motives during a mutual fund crisis 2005. This study also controls the effect of different types of investors on empirical models. This study used primary data with a sample of 96 mutual fund investors, of which 46 are investors who have invested in a period of mutual fund crises. This study adopted a factor analysis technique to reduce the number of variables and minimize multicollinearity between independent variables. Furthermore, t-test in multiple regression analysis is used to test the research hypothesis. The results showed that the influence of investment motives and investment benefits on mutual fund investment performance is sensitive to different types of investors. Investors who also invest directly in the capital market seem more sophisticated in managing their portfolios than investors who only invest in the mutual fund market. Investors make redemption of funds in a period of mutual fund crisis caused by misleading factors rather than panic factors. This study found no signs of trauma from investors after experiencing huge investment losses due to the mutual fund crisis in 2005.

Investment Decisions Under Ambiguity: Evidence from Mutual Fund Investor Behavior

We provide novel evidence on the role of ambiguity aversion in determining the response of mutual fund investors to fund performance. Our analysis is motivated by theoretical models of decision making by ambiguity-averse investors. A key implication of the models is that when investors face information signals of uncertain quality, they place a greater weight on the worst signal. We find strong empirical support for this prediction in the form of heightened sensitivity of investor fund flows to the worst performance measure across multiple horizons. This effect is particularly pronounced for retail funds in contrast to institutional funds.

Is Big Brother Watching Us? Google, Investor Sentiment and the Stock Market

This paper proposes a novel measure of French investor sentiment based on the volume of internet search reported by Google Trends. We find that our sentiment indicator correlates well with alternative sentiment measures often used in the literature. Furthermore, we find that investor sentiment influences the behavior of mutual fund investors. The results also reveal evidence about short-run predictability in return. An increase in our sentiment index leads to short-term return reversal. The reversal pattern is more pronounced for smaller firms than larger firms, consistent with the predictions of noise trader’s models.

Managerial Turnover and the Behavior of Mutual Fund Investors

Using a sample of domestic U.S. equity mutual funds, we find strong evidence that investors respond to managerial replacements. We find that the top performing funds that have a change in management subsequently have lower flows compared to funds of which the manager is retained. On top of that, we find that funds replacing their bad performing manager subsequently have lower flows compared to bad performing funds with a continuing manager. This latter finding is inconsistent with a world of rational expectations. The finding is, however, in line with a signaling hypothesis, even though we find evidence that the signals mutual fund investors perceive from managerial turnover is not justified as fund performance increases following the replacement of bad performing managers. Interestingly, the results are very similar for institutional funds and retail funds. Our finding cannot be explained by differences in fund characteristics such as the age of a fund, size, or expenses, or by differences in portfolio risks.

Mutual Fund Investor Behavior Across the Business Cycle

Mutual fund investor behavior changes across the business cycle. In economic expansions, investors strongly display the documented behaviors of chasing returns and searching for managerial skill. Expansion investors earn higher returns and alphas by pursuing this strategy, but this result is partially explained by the momentum effect. In contrast, recession investors do not chase returns and exhibit a weaker tendency to seek alpha. Even before controlling for momentum, no smart money effect exists in recessions. Instead of chasing performance, recession investors make investment decisions to change their exposure to aggregate risk factors. Investors tend to avoid funds with exposure to the market and book-to-market factors during recessions, while they show the opposite pattern in expansions.

Behavioral Factors in Mutual Fund Flows

Using a sample of daily net flows to nearly 1,000 U.S. mutual funds over a year and a half period, we identify a set of systematic factors that explain a significant amount of the variation in flows. This suggests the existence of a common component to mutual fund investor behavior and indicates which asset classes may be regarded as economic substitutes by the participants in the market for mutual fund shares. We find that flows into equity funds -- both domestic and international -- are negatively correlated to flows to money market funds and precious metals funds. This suggests that investor rebalancing between cash and equity explains a significant amount of trade in mutual fund shares. The negative correlation of equities to metals suggests that this timing is not simply due to liquidity concerns, but rather to sentiment about the equity premium. We address the question of whether behavioral factors spread returns by using the mutual fund flow factors as pre-specified regressors in a Fama-MacBeth asset pricing framework. We find that the factors derived from flows alone explain as much as 45% of the cross-sectional variation in mutual fund returns. The fund flow factors provide significant incremental explanatory power in the cross-sectional regressions on daily returns. We consider a number of alternatives to explain our evidence including causality from returns to flows and vice-versa. Our evidence is consistent with the existence of a pervasive investor sentiment variable.