We examine how fund flows that are correlated with subsequent fund returns can impact the performance of open-end mutual fund through a dilution effect. Since these flows tend to put cash into a fund just prior to positive returns on the fund?s risky assets, the cash dilutes the fund?s return....

Capacity constraints limit the profits of some investment strategies, while other strategies are more scalable. We develop a dollar-weighted return measure that parses the factor timing by investors and a strategy's capacity constraints. We find that actively managed funds exhibit significant...

Open-end mutual funds usually rely on the closing prices of the assets they hold to compute their net asset value (NAV), a price at which funds stand ready to buy and sell their own shares. Since the underlying assets' closing prices might be hours or even days old, the fund's NAV can be stale....