Seeking Alpha: Which Asset Pricing Models Matter to Investors? Empirical Evidence from European Mutual Fund Flows
No Thumbnail Available
URL
Journal Title
Journal ISSN
Volume Title
School of Business |
Bachelor's thesis
Electronic archive copy is available locally at the Harald Herlin Learning Centre. The staff of Aalto University has access to the electronic bachelor's theses by logging into Aaltodoc with their personal Aalto user ID. Read more about the availability of the bachelor's theses.
Authors
Date
2018
Department
Major/Subject
Mcode
Degree programme
Rahoitus
Language
en
Pages
30
Series
Abstract
This paper investigates the relationship between fund flows and various performance measures using two differing approaches. I find that investors prefer the simple market-adjusted returns and the Capital Asset Pricing Model when the assessment period is short but shift towards using more advanced models when longer assessment horizons are considered. On aggregate, appears that investors prefer to use 3-year assessment horizon when evaluating fund performance. While all of the examined performance measures contribute positively and significantly to the fund flows, they explain, at the most, only two thirds of the fund flows. Thus, substantial amount of flows remains unexplained. Furthermore, when I investigate the period before and after the financial-crisis, appears that investors have recently adopted the use of a more complicated performance measures, i.e. use of the multifactor models. In contrast, I find no supporting evidence on a hypothesis that more sophisticated investors would prefer more advanced performance measures.Description
Thesis advisor
Spickers, TheresaKeywords
mutual fund, fund flow, asset pricing model, performance, Alpha