Investor Attrition and Fund Flows in Mutual Funds

Susan E. K. Christoffersen, Haoyu Xu
2017 Journal of Financial and Quantitative Analysis  
We explore the properties of equity mutual funds that experience a loss of assets after poor performance. We document that both inflows and outflows are less sensitive to performance, because performance-sensitive investors leave or decide not to invest after bad performance. Consistent with the idea that attrition measures the sorting of performance-sensitive investors, we find that attrition has less of an impact on the fund's flow–performance sensitivity for institutional funds where there
more » ... less dispersion in investor performance sensitivity. Also, attrition has no effect on the flow–performance sensitivity when attrition arises after good performance or investors invest for nonperformance reasons.
doi:10.1017/s0022109017000291 fatcat:44efggwysvbrndbp4wqwzmsocu