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Article
Publication date: 6 June 2016

Lorenzo Casavecchia

The purpose of this paper is to identify the implications of managerial herding for investors’ wealth and capital allocation across funds, and the critical role played by fund…

Abstract

Purpose

The purpose of this paper is to identify the implications of managerial herding for investors’ wealth and capital allocation across funds, and the critical role played by fund governance in monitoring herding incentives.

Design/methodology/approach

The author adopt the fund herding measure first proposed by Grinblatt et al. (1995) over the long sample period 1992-2007. Univariate and multivariate tests are then constructed to examine the relationship between managerial herding, performance, and investors’ sensitivities. OLS, fixed-effect panel data models are utilized to conduct the tests.

Findings

The author show that managers that do not herd have above-average managerial skills, trade less on noise, and significantly outperform herding managers. The author also illustrate that although fund herding could be used as a signal of managerial quality, underperforming herding funds manage to survive in equilibrium, indicating that investor flows do not adequately respond to the information content of a persistent herding behavior. Finally, the author demonstrate that better governance in the form of stronger managerial incentive schemes constitutes a significant deterrent against detrimental herding strategies, representing an effective monitoring device of the response of fund managers to poor flow-performance sensitivity.

Originality/value

The paper provides original evidence on the efficacy of external and internal governance in deterring wealth-reducing herding strategies. The author document that where more effective managerial incentives schemes are put in place by the management companies, fund managers are more likely to be better informed, resulting in fewer incentives to mimic the trading decisions of their peers.

Details

International Journal of Managerial Finance, vol. 12 no. 3
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 30 December 2019

Ofer Arbaa and Eva Varon

The purpose of this paper is to study the sensitivity of provident fund investors to past performance and how market conditions, changes in risk and liquidity levels influence the…

Abstract

Purpose

The purpose of this paper is to study the sensitivity of provident fund investors to past performance and how market conditions, changes in risk and liquidity levels influence the net flows into provident funds by using a unique sample from Israel.

Design/methodology/approach

The study checks the impact of different levels of fund performance on provident fund flows using three alternative proxies for performance: raw return and the risk adjusted returns based on the Sharpe ratio and the Jensen’s α. The analysis relies on the time fixed effect and fund fixed effect regression models.

Findings

Results reveal that there exists an approximately concave flow–performance relationship and performance persistence among Israeli provident funds. Israeli provident fund investors are risk averse so they overreact to bad performance both in bull and bear markets. Moreover, liquidity is an important factor to influence the flow–performance curve. The investors’ strong negative response to poor performance and relative insensitivity to outperformance show that provident fund managers are not rewarded for their risk-shifting activities as in mutual funds.

Originality/value

The authors explore the behavior of investor flows in non-institutional retirement savings funds specifically outside of the USA, which is a topic not properly investigated in literature. Moreover, examining inflows and outflows separately gives the authors a richer understanding of investors in pension schemes. This study also enhances the understanding of the impact of fund liquidity on the flow–performance relationship for the retirement funds segment.

Details

International Journal of Managerial Finance, vol. 16 no. 3
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 17 August 2015

Ainulashikin Marzuki and Andrew Worthington

– The purpose of this paper is to compare the fund flow – performance relationship for Islamic and conventional equity funds in Malaysia.

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Abstract

Purpose

The purpose of this paper is to compare the fund flow – performance relationship for Islamic and conventional equity funds in Malaysia.

Design/methodology/approach

The authors use panel regression models to estimate the relationship between fund flows and performance for Islamic and conventional equity funds in Malaysia from 2001 to 2009. The data for each fund include fund flows, assets under management, management expenses, fund age, portfolio turnover, fund risk and return and the number of funds in the fund’s family. The authors also include market returns and year effects. The sample consists of 127 Malaysian equity funds with at least 65 per cent domestic equity holdings comprising 35 Islamic and 92 conventional equity funds.

Findings

Islamic fund investors respond to performance in much the same way as conventional fund investors, increasing fund flows to better performing funds and decreasing fund flows to poorer performing funds. However, there is also evidence that Islamic fund investors are relatively less responsive toward poorly performing Islamic funds, suggesting an asymmetry in the expected positive fund flow – performance relationship, but only for Islamic fund investors. When choosing funds based on other fund attributes, Islamic fund investors again exhibit similar behaviour, and like conventional fund investors direct larger percentage fund flows into smaller funds as well as funds with larger past fund flows and higher expense ratios.

Research limitations/implications

The authors were only able to access data on annual net fund flows not quarterly or monthly fund inflows and outflows as usual in developed markets and this may obscure some important aspects of investor decision-making. There is also insufficient data for matched-sample techniques, which may better control for fund-specific characteristics.

Practical implications

Islamic funds like conventional funds will experience increased fund flows with better performance and vice versa. However, Islamic fund investors appear somewhat less likely to remove monies from poorly performing funds. The authors believe this is because investors either place a premium on the non-return attributes of Shariah-compliant funds and/or wish to avoid search costs in finding another suitable Islamic fund. Apart from this, Islamic and conventional fund investors behave in a similar manner, and the authors believe that this is possible in Malaysia given the size and diversity of its Islamic fund sector.

Originality/value

This paper is one of the very few empirical studies concerning the behaviour of Islamic investors, particularly in Malaysia, primarily because of limitations in data availability.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 8 no. 3
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 10 November 2021

Kozo Omori and Tomoki Kitamura

Mutual fund investors assess a fund manager’s skills when allocating their capital. To identify the rationale behind retail investors’ decisions, this study aims to examine the…

Abstract

Purpose

Mutual fund investors assess a fund manager’s skills when allocating their capital. To identify the rationale behind retail investors’ decisions, this study aims to examine the relation between mutual fund flows and abnormal returns (alpha), as well as the various risk factors in the Japanese mutual fund market, which has distinctive characteristics regarding investors and distributors.

Design/methodology/approach

Six standard asset pricing models are used to investigate how investors assess mutual fund managers’ skills: the market-adjusted return, the capital asset pricing model and the Fama–French three-factor model and its augmented versions.

Findings

Contrary to the literature, this study finds that investors in Japan mainly rely on alpha to assess mutual funds. In particular, investors respond to alpha for fund inflows and their evaluations depend on the market environment and their mutual fund search costs.

Originality/value

This study measures the response of investors to the skills of mutual fund managers in the Japanese market – especially for funds purchased through bank-related distributors that have aimed to capture inexperienced retail investors since deregulation in the 1990s – and reveals their high response to alpha.

Details

Studies in Economics and Finance, vol. 39 no. 4
Type: Research Article
ISSN: 1086-7376

Keywords

Article
Publication date: 8 September 2020

Eddie Sanchez and Junho Oh

The purpose of this paper is to analyze the behavior of institutional and retail investors in S&P 500 index funds separately to determine why they behave differently.

Abstract

Purpose

The purpose of this paper is to analyze the behavior of institutional and retail investors in S&P 500 index funds separately to determine why they behave differently.

Design/methodology/approach

We analyze the relationship between net flow and past index-adjusted returns or expense ratios more extensively via panel data regressions across a broad dataset.

Findings

We find that the holding of institutional investors is, indeed, sticky. The results indicate that the net flow of institutional investors is not sensitive to past index-adjusted returns of expense ratios.

Originality/value

Prior studies have attempted to explain the irrational behavior of investors in S&P 500 index funds. We attempt to show plausible reasons why they behave differently.

Details

Managerial Finance, vol. 47 no. 1
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 8 February 2016

Sreekala S.K. and Thirumalini S.

Globe valves have good throttling ability, which permits its use in regulating flows. This paper aims to understand in detail the globe valve with different cage configurations…

Abstract

Purpose

Globe valves have good throttling ability, which permits its use in regulating flows. This paper aims to understand in detail the globe valve with different cage configurations and its impact on the flow characteristics that was carried out.

Design/methodology/approach

The computational study was carried out using FLUENT, a finite volume-based numerical code. Grid sensitivity tests were done and the results were validated experimentally. The effect of cage configuration on flow characteristics and valve coefficient was studied and optimised.

Findings

Valve coefficient was found to be dependent on cage configuration and reaches its maximum for the valve with triangular shaped aperture. Methodology to improve flow performance of a globe valve with highest valve coefficient is established.

Originality/value

Studies related with caged-type globe valves having different configurations are useful for improving their flow performance. In the present investigation, globe valves with different cage configurations and throttle positions are modeled to find out the valve coefficient, pressure and velocity contours inside and outside the cage and is validated with experimental results.

Details

World Journal of Engineering, vol. 13 no. 1
Type: Research Article
ISSN: 1708-5284

Keywords

Article
Publication date: 25 August 2023

Niket Thakker, Hitesh Kalro, Mayank Joshipura and Prashant Mishra

This study examines current dynamics, consolidates current knowledge, elicits trends, identifies and analyzes primary research clusters, and offers future research directions for…

Abstract

Purpose

This study examines current dynamics, consolidates current knowledge, elicits trends, identifies and analyzes primary research clusters, and offers future research directions for mutual fund marketing.

Design/methodology/approach

Using bibliographic information from the SCOPUS database, this study used sequential bibliometric (143 documents) and content analyses (37 documents). Bibliometric analysis aids descriptive analysis and science mapping, while content analysis facilitates identifying and analyzing research clusters and provides future research directions.

Findings

The study identifies publication trends, the most relevant authors, and journal articles and unveils the knowledge structures of the field. Analysis of bibliographic coupling reveals the following significant clusters: (1) socially responsible investing and investor preferences, (2) investor factors and traits and investment decisions; (3) external factors, mutual funds' performance and proxy information; (4) the role of disclosures and ratings in shaping investment choices, and (5) cognitive biases, information processing errors and investor behavior. Finally, it offers future research directions.

Research limitations/implications

Using different databases, bibliometric analysis tools, study periods or article screening criteria for the study might yield different results. However, this study's significant findings are robust to such alternatives.

Practical implications

This study summarizes primary clusters and identifies gaps in the current literature, which helps scholars, practitioners, regulators and policymakers understand the nuances of mutual funds marketing. Future studies may focus on the role of online and offline integration, using neuroscience for data m and contemporary investment behavior models.

Originality/value

This is the first study to apply a two-stage sequential hybrid review of articles published over the last decade in high-quality journals, enabling an analysis of the depth and breadth of mutual funds marketing research.

Details

International Journal of Bank Marketing, vol. 41 no. 7
Type: Research Article
ISSN: 0265-2323

Keywords

Article
Publication date: 1 February 2021

Yaman Omer Erzurumlu and Idris Ucardag

This paper aims to investigate private pension fund investor sentiment against fund performance and cost in an environment of frequent regulatory changes. The analyses are…

Abstract

Purpose

This paper aims to investigate private pension fund investor sentiment against fund performance and cost in an environment of frequent regulatory changes. The analyses are conducted in a low return, high-cost private pension fund market environment, which makes it easier to observe the relationship between investor sentiment to return and cost.

Design/methodology/approach

This paper conducts fixed effect, random effect and random effect within between effect panel data analyses of all Turkish private pension funds from 2011 to 2019. This paper conducts the analyses using aggregate data and subsets based on fund characteristics and pre-post regulation periods.

Findings

When regulations provide compensation and improve market efficiency in a pension fund market, investor focus shifted from performance to cost. Investors allocated assets with respect to return realization when adequately compensated for risk or had favorable cost contract clauses. Consequently, investors in pension funds with lower expected returns and no special fee reduction clauses tended to adopt the strategy of cost minimization.

Research limitations/implications

The overlap of regulatory change periods could complicate the ability to distinguish the impact of any one specific change. The findings therefore cannot be generalized to differently structured markets.

Practical implications

Regulatory changes could lead to a switch of investor objectives. When regulatory changes compensate investors and increase market efficiency, investors objective could switch from performance to cost.

Originality/value

This study investigates investor sentiment in a relatively young private pension fund market, in which the relevant regulatory body ambitiously implements frequent changes in regulation. The selected market is unique in the sense that it has negative real returns and high costs, which make investor focus to return and cost more readily apparent.

Details

Journal of Financial Regulation and Compliance, vol. 29 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 22 March 2022

Bader Jawid Alsubaiei

This study aims to examine the role of fund family size on the money flow of Saudi Arabian open-end equity mutual funds. The author also investigates whether the relationship…

Abstract

Purpose

This study aims to examine the role of fund family size on the money flow of Saudi Arabian open-end equity mutual funds. The author also investigates whether the relationship between fund flow and past return varies based on the fund's family size.

Design/methodology/approach

The study analyses 256 equity funds that operated in Saudi Arabia from 2006 until 2017. Pooled and fixed-effect regression models are used to test the relationship between mutual fund flow and family size.

Findings

The results indicate that fund flow is higher for large size family funds. The results also show that the relationship between mutual fund flow and past performance is more pronounced for large size families, which supports the concept that investors pay extra attention to funds' return and size.

Research limitations/implications

The author provides evidence of the significant effect of family size of mutual funds on future money flow, which helps fund managers to understand investors' motivations for allocating their cash.

Originality/value

This paper contributes to the literature by examining the impact of family size level on the interaction between fund flow and past performance. This study is believed to be the first to investigate the family size factor in Saudi Arabia using a comprehensive data set.

Details

International Journal of Emerging Markets, vol. 18 no. 12
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 24 May 2021

Zhai Cong and Weitiao Wu

In the era of connected and autonomous vehicles, a large amount of surrounding vehicular information can be acquired by the focal vehicle in real time using vehicle-to-vehicle…

Abstract

Purpose

In the era of connected and autonomous vehicles, a large amount of surrounding vehicular information can be acquired by the focal vehicle in real time using vehicle-to-vehicle communication technology, such as the core variable of electronic throttle opening angle. Meanwhile, the traffic jerk, such as the non-compliance of drivers and pedestrians, worsens the chaos of the surrounding traffic environment. To reflect the future traffic environment, the authors simultaneously incorporate the electronic throttle (ET) and traffic jerk into the traditional continuum model. The authors derive the stability criterion of the enhanced continuum model via the perturbation method.

Design/methodology/approach

To facilitate insight into the propagation and evolution mechanism of traffic jam near the stability condition, the authors use the nonlinear stability analysis method to derive the KdV-Burgers equation of proposed continuum model.

Findings

The new item of ET opening angle and traffic jerk have a positive impact on suppressing traffic congestion and improving road robustness.

Originality/value

The research on autonomous continuum models is rare. This model can better reflect the actual traffic, which can also provide a theoretical reference for the future traffic governance.

Details

Engineering Computations, vol. 38 no. 10
Type: Research Article
ISSN: 0264-4401

Keywords

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