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6-20 Professor Yang Jun, Business School, Acadia University, Canada: Dumb Money and Smart Managers in Chinese Mutual Funds

  Time: June 20th, 2:00-4:00 pm

  Location: Main Building 426


  Speaker profile:

  Yang Jun, Ph.D., Queen's University, Canada, is currently a professor of finance at the Acadia University School of Business.The research covers a wide range of topics, including asset pricing, behavioral finance, and China's financial markets.He has published more than 20 academic papers in journals such as Journal of Corporate Finance, Journal of Banking & Finance, and Pacific-Basin Finance Journal.


  Investors actively reallocate their money across different mutual funds. It has been found that funds attracting high cash inflows subsequently perform more poorly when fund characteristics are controlled. It is referred to as the dumb money effect (Frazzini and Lamont, 2008), suggesting that investors lose wealth in the long run. However, its evidence outside the U.S. is rare. Do investors in other markets tread on the same rake? If so, is it still worthwhile to invest in mutual funds? This article provides some answers in the Chinese market.

  Our panel sample includes quarterly data for 125 equity and primarily equity mutual funds in China between 2009 and 2016. We use FLOW proposed by Frazzini and Lamont (2008) as the measure of investor sentiment on different mutual funds and find that sentiment is negatively linked to subsequent fund performance (raw return, Fama-French three-factor adjusted return, or Carhart four-factor adjusted return). This dumb money effect is asymmetrically driven by positive sentiment. Evidence is revealed that mutual fund managers in China possess stock picking expertise, but it is undermined by the dumb money effect.

  (Hosted by: Technical Economics and Management Department, Research and Academic Exchange Center)