We investigate the role of extreme positive payoffs in the distribution of monthly fund returns in investors' mutual fund preferences. We document a positive and significant relationship between the maximum style-adjusted monthly return (MAX) and future fund flows. The relationship is robust to...

This paper analyzes the “return gap” between dollar-weighted returns that account for intermediate investor flows (internal rate of return) and buy-and-hold returns that funds typically report. Our sample constitutes all US-domiciled open-end mutual funds and exchange-traded funds (ETFs),...

We find that aggregate net equity fund flows are strongly negatively correlated with changes in expected future stock market volatility as measured by the VIX. Implying that investor purchase decisions are primarily driven by returns and sale decisions by risk perceptions, we further find that...

To explore how portfolio allocations among equities, fixed income securities, and cash are impacted by investors' risk and return expectations, this paper explores portfolio reallocations among equity, bond, and money market mutual funds. As predicted by the literature on optimal portfolio...

To explore how portfolio allocations among equities, fixed income securities, and cash are impacted by investors' risk and return expectations, this paper explores portfolio reallocations among equity, bond, and money market mutual funds. As predicted by the literature on optimal portfolio...

This paper investigates the sensitivity of the demand for safe government debt to currency unhedged and hedged excess returns in a sample of US mutual funds. We find evidence of active rebalancing towards government bonds that offer relatively higher returns on an unhedged basis, in particular...