NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Ian Tonks

University of Exeter
Finance & Investment
Rennes Drive
Exeter, EX4 4PU UK
Tel: 44-1392-263461

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NBER Working Papers and Publications

April 2007Return Persistence and Fund Flows in the Worst Performing Mutual Funds
with Jonathan B. Berk: w13042
We document that the observed persistence amongst the worst performing actively managed mutual funds is attributable to funds that have performed poorly both in the current and prior year. We demonstrate that this persistence results from an unwillingness of investors in these funds to respond to bad performance by withdrawing their capital. In contrast, funds that only performed poorly in the current year have a significantly larger (out)flow of funds/return sensitivity and consequently show no evidence of persistence in their returns.
 
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