Family Values and the Star Phenomenon: Strategies of Mutual Fund Families

We examine the extent to which a fund's cash flows are affected by the stellar performance of other funds in its family--and consequences of such spillovers. We show that star performance results in greater cash inflow to the fund and to other funds in its family. Moreover, families with higher...

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Veröffentlicht in:The Review of financial studies 2004-10, Vol.17 (3), p.667-698
Hauptverfasser: Nanda, Vikram, Wang, Z. Jay, Zheng, Lu
Format: Artikel
Sprache:eng
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Zusammenfassung:We examine the extent to which a fund's cash flows are affected by the stellar performance of other funds in its family--and consequences of such spillovers. We show that star performance results in greater cash inflow to the fund and to other funds in its family. Moreover, families with higher variation in invetment strategies across funds are shown to be more likely to generate star performance. We argue that spillovers may induce lower ability families to pursue star-creating strategies. Consistent with our conjecture, families with high variation in investment strategies across funds significantly underperform low-variation families.
ISSN:0893-9454
1465-7368
DOI:10.1093/rfs/hhg054