Reference-Dependent Return Chasing

@inproceedings{Brunner2018ReferenceDependentRC,
  title={Reference-Dependent Return Chasing},
  author={Fabian Brunner},
  year={2018}
}
The performance-flow relation in mutual funds is mediated by the gains and losses investors hold a fund at. The chasing of past abnormal performance gets strongly attenuated and convexity is eliminated if the average investor holds the fund at a loss. Thus, fund investors distinctly react to an interaction between abnormal performance and gains and losses after controlling for the respective base effects. This interaction is not an artifact of omitted residual information or non-linearity. The… CONTINUE READING

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