Handle with care: Distribution effects on the estimated cash flows to equity funds

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Abstract

In this paper, we compare the estimated monthly net cash flows to mutual fund following Sirri and Tufano (1998) and the reported net flows from the N-SAR filings. We show that the well accepted estimation of net flows would be underestimated when only small portion of the distribution from mutual funds are reinvested. The deviation of the reported net flows from the estimated net flows is significantly affected by the income distribution and the capital distribution at the 1 percent level but the underestimation of net flows is more sensitive to the capital distribution than the income distribution. Therefore, researchers should be cautious when they use the estimation formula for mutual fund flows especially in a month with distributions.

Original languageEnglish
Pages (from-to)313-319
Number of pages7
JournalInvestment Management and Financial Innovations
Volume11
Issue number4
StatePublished - 2014

Bibliographical note

Publisher Copyright:
© Hyung-Suk Choi, 2014.

Keywords

  • Capital distribution effect
  • Estimated fund flows
  • Income distribution effect
  • Reported fund flows

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