Thesis
English
ID: <
10670/1.nt8bxd>
Abstract
In light of this, Essays 1 and 3, co-authored with Vijay Yadav, study the sensitivity of investment flows to past performance, also known as flow-performance sensitivity (FPS). The main aim of Essay 1 is to contribute towards the ongoing debate regarding the shape of the flow-performance relationship in the equity mutual fund industry. Essentially, the question is whether the relationship is linear or non-linear. Whereas Essay 1 addresses the shape of the flow-performance relationship, Essay 3 studies the determinants of its strength. Past performance is a signal that is used by investors when making investment allocation decisions. The main finding of Essay 3 is that the composition of the fund portfolio has an impact on the FPS of the fund. More specifically, a mutual fund manager can decrease flow-performance sensitivity by increasing the total equity portfolio weights of defensive stocks and sensitive stocks, where the former is more effective. In Essay 2, I examine active equity mutual funds that close to new investors.