The Informational Role of Fund Flow in the Profitable Predictability of Mutual Funds

This study examines if mutual fund flow information can be exploited as a predictor for future fund performance, and if an economically profitable trading strategy can be executed. My central finding is that investors can improve their fund selection ability and beat the market conditional on correctly predicting the direction of the forecasted fund returns induced by fund flows in an out-of-sample (OOS) forecasting context. This evidence, on the informational role of fund flow, provides important insights to academic researchers and practitioners