TY - JOUR
T1 - Smart money, dumb money, and capital market anomalies
AU - Akbas, Ferhat
AU - Armstrong, Will J.
AU - Sorescu, Sorin
AU - Subrahmanyam, Avanidhar
N1 - Publisher Copyright:
© 2015 Elsevier B.V.
PY - 2015/11
Y1 - 2015/11
N2 - We investigate the dual notions that "dumb money" exacerbates well-known stock return anomalies and "smart money" attenuates these anomalies. We find that aggregate flows to mutual funds (dumb money) appear to exacerbate cross-sectional mispricing, particularly for growth, accrual, and momentum anomalies. In contrast, hedge fund flows (smart money) appear to attenuate aggregate mispricing. Our results suggest that aggregate flows to mutual funds can have real adverse allocation effects in the stock market and that aggregate flows to hedge funds contribute to the correction of cross-sectional mispricing.
AB - We investigate the dual notions that "dumb money" exacerbates well-known stock return anomalies and "smart money" attenuates these anomalies. We find that aggregate flows to mutual funds (dumb money) appear to exacerbate cross-sectional mispricing, particularly for growth, accrual, and momentum anomalies. In contrast, hedge fund flows (smart money) appear to attenuate aggregate mispricing. Our results suggest that aggregate flows to mutual funds can have real adverse allocation effects in the stock market and that aggregate flows to hedge funds contribute to the correction of cross-sectional mispricing.
KW - Fund flows
KW - Hedge funds
KW - Mispricing
KW - Mutual funds
KW - Stock return anomalies
UR - http://www.scopus.com/inward/record.url?scp=84946477369&partnerID=8YFLogxK
U2 - 10.1016/j.jfineco.2015.07.003
DO - 10.1016/j.jfineco.2015.07.003
M3 - Article
AN - SCOPUS:84946477369
VL - 118
SP - 355
EP - 382
JO - Journal of Financial Economics
JF - Journal of Financial Economics
SN - 0304-405X
IS - 2
M1 - 2570
ER -