Do After-Tax Returns Affect Mutual Fund Inflows? / Daniel Bergstresser, James Poterba.

Format:

Book

Author/Creator:

Bergstresser, Daniel.

Contributor:

National Bureau of Economic Research.

Poterba, James.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7595.

NBER working paper series no. w7595

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Summary:

This paper explores the relationship between the after-tax returns that taxable investors earn on equity mutual funds and the subsequent cash inflows to these funds. Previous studies have documented that funds with high pretax returns attract greater inflows. This paper investigates the relative predictive power of pre-tax and after-tax returns for explaining annual fund inflows. The empirical results, based on a large sample of equity mutual funds over the period 1993-1998, suggest that after-tax returns have more explanatory power than pretax returns in explaining inflows. In addition, funds with large overhangs' of unrealized capital gains experience smaller inflows, all else equal, than funds without such unrealized gains. By disaggregating net fund inflows into gross inflows and gross redemptions, the paper also provides some insight on how after-tax returns and prospective capital gain realizations affect investor behavior.

Notes:

Print version record

March 2000.