Research

Mutual Fund Flows and Investor Returns: An Empirical Examination of Mutual Fund Investor Timing Ability

We examine the timing ability of mutual fund investors using cash flow data at the individual fund level. Over 1991-2004 equity fund investor timing decisions reduce fund investor average returns by 1.56% annually. Underperformance due to poor timing is greater in load funds and funds with relatively large risk-adjusted returns. In particular, the magnitude of investor underperformance due to poor timing largely offsets the risk-adjusted alpha gains offered by good-performing funds. Investors in both actively managed funds and index funds exhibit poor investment timing. We demonstrate that our empirical results are consistent with investor return-chasing behavior.

Publication Information
Article Title: Mutual Fund Flows and Investor Returns: An Empirical Examination of Mutual Fund Investor Timing Ability
Journal: Journal of Banking and Finance (Sep, 2007)
Author(s): Friesen, Geoffrey C;  Sapp, Travis R. A.
Researcher Information
    
Friesen, Geoffrey C
Friesen, Geoffrey C
Associate Professor of Finance
Expertise:
  • Behavioral Finance
  • Financial Institutions
  • Financial Markets & Investing
  • Insurance
Finance
CoB 425 N
P.O. Box 880490
University of Nebraska-Lincoln
Lincoln, NE 68588-0490, USA
Phone: (402) 472-2334
Fax: (402) 472-5140
gfriesen2@unl.edu