Consumer reaction on tumbling funds: Evidence from retail fund outflows during the financial crisis 2007/2008
Research output: Working paper › Working papers
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Lüneburg: Institut für Volkswirtschaftslehre der Universität Lüneburg, 2012. p. 1-28 (Working Paper Series in Economics; No. 228).
Research output: Working paper › Working papers
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TY - UNPB
T1 - Consumer reaction on tumbling funds
T2 - Evidence from retail fund outflows during the financial crisis 2007/2008
AU - Schmidt, Daniel
AU - Schmielewski, Frank
PY - 2012
Y1 - 2012
N2 - Contrary to the findings reported in some of the extant literature, our study indicates that over the past few years a change in investors’ behavior patterns means that investment decisions are made at short notice, and that shares are redeemed in a discriminatory manner when funds perform poorly. By using a data assembled from 1672 retail funds in Germany over the period March 2008 to April 2010, we are able to show that in general, both the prior fund performance and prior net redemptions have a statistically significant influence on fund outflows. Moreover, there are indications that in recent crises situations that have resulted in the withdrawal of shares investors react fast to market signals. Our findings will also highlight areas in which policy-makers, regulatory authorities and the fund industry should establish a strong regulatory framework to prevent liquidity shortages of retail funds.
AB - Contrary to the findings reported in some of the extant literature, our study indicates that over the past few years a change in investors’ behavior patterns means that investment decisions are made at short notice, and that shares are redeemed in a discriminatory manner when funds perform poorly. By using a data assembled from 1672 retail funds in Germany over the period March 2008 to April 2010, we are able to show that in general, both the prior fund performance and prior net redemptions have a statistically significant influence on fund outflows. Moreover, there are indications that in recent crises situations that have resulted in the withdrawal of shares investors react fast to market signals. Our findings will also highlight areas in which policy-makers, regulatory authorities and the fund industry should establish a strong regulatory framework to prevent liquidity shortages of retail funds.
KW - Economics, empirical/statistics
KW - Liquidity risk
KW - financial fragility
KW - bank run
KW - mutual funds
KW - fund flows
KW - net redemption of fund shares
KW - fund performance
KW - fund industry
KW - risk sharing
KW - Economics
UR - http://econpapers.repec.org/paper/luewpaper/228.htm
M3 - Working papers
T3 - Working Paper Series in Economics
SP - 1
EP - 28
BT - Consumer reaction on tumbling funds
PB - Institut für Volkswirtschaftslehre der Universität Lüneburg
CY - Lüneburg
ER -