Can Mutual Fund Investors Distinguish Good from Bad Managers?

36 Pages Posted: 26 May 2020

See all articles by Teodor Dyakov

Teodor Dyakov

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Marno Verbeek

Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM); Netspar

Date Written: September 2019

Abstract

Mutual fund flows respond significantly to the return gap, which captures information about unobserved actions of mutual funds and predicts future performance. The sensitivity of fund flows to the return gap is: (i) strong and positive; (ii) increasing with investor sophistication; (iii) highly nonlinear; and (iv) decreasing with the informativeness of past fund returns. On average, the response of investors to the return gap enhances their performance. Our findings suggest there is a sophisticated mass of investors who can distinguish good from bad managers using information that may not be directly inferred from standard performance indicators.

Suggested Citation

Dyakov, Teodor and Verbeek, Marno, Can Mutual Fund Investors Distinguish Good from Bad Managers? (September 2019). International Review of Finance, Vol. 19, Issue 3, pp. 505-540, 2019, Available at SSRN: https://ssrn.com/abstract=3603489 or http://dx.doi.org/10.1111/irfi.12187

Teodor Dyakov (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 59 82197 (Phone)
+31 20 59 86020 (Fax)

HOME PAGE: http://www.teodordyakov.work

Tinbergen Institute ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

Marno Verbeek

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands
+31 10 408 2790 (Phone)

HOME PAGE: http://www.rsm.nl/mverbeek

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
362
PlumX Metrics