Is Money Really 'Smart'? New Evidence on the Relation between Mutual Fund Flows, Manager Behavior, and Performance Persistence

Paper: SSRN 414420

Abstract

Mutual fund returns strongly persist over multi-year periods - that is the central finding of this paper. Further, consumer and fund manager behavior both play

Complexity vs Empirical Score

• Math Complexity: 4.0/10
• Empirical Rigor: 8.5/10
• Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper employs extensive empirical data analysis (CRSP mutual fund database, cross-sectional regressions, style adjustments) to test hypotheses about fund flows and performance, but uses relatively standard financial econometrics without complex mathematical derivations.

Research Flowchart

  flowchart TD
  A["Research Goal<br>Test Persistence of Mutual Fund Returns<br>and Roles of Manager Behavior & Flows"] --> B["Key Methodology<br>Longitudinal Performance Analysis"]
  B --> C{"Data / Inputs"}
  C --> C1["Multi-Year Mutual Fund Returns"]
  C --> C2["Manager Behavior Data"]
  C --> C3["Net Flows & Investor Sentiment"]
  C1 & C2 & C3 --> D["Computational Process<br>Regression & Persistence Metrics"]
  D --> E["Key Findings / Outcomes"]
  E --> E1["Strong Multi-Year Persistence Found"]
  E --> E2["Manager Behavior Explains Persistence"]
  E --> E3["Flows Reinforce Manager Behavior"]