The Determinants of Mutual Fund Flow: The Asymmetric Response of Flow to Past Performance View

This paper investigates the relationships between mutual fund flows
and various determinants, and whether these determinants will influence the investors’ asymmetric response of flow-performance.
High past performance funds and low fee funds enjoy high fund flows, and these finding are consistent with previous literature results. This paper also explores the impacts of search costs on fund flows using fund company size, the non-local country-of-origin(COO), and spillover effect as proxies. We find that funds in larger fund companies and non-local COO are positively related to fund flows, while the funds with spillover effect are negatively related to fund flows.
After classifying fund past performance, we find that the flow-performance
relationship of mutual funds is asymmetric in Taiwan. Fund investors in Taiwan will redeem less fund contrary to they purchase more fund with good performance. While the funds are issued by larger or non-local companies, the redemption will be even smaller.
Our results shed light on the behavior of fund investors and discover the asymmetric response will be influenced according to fund companies. This provides insights for fund managers and fund companies to make strategies.