Abstract
We study a regulation that increased mutual funds’ risk salience through name change. Using daily fund flow data and several identification strategies, we find that requiring certain fixed income mutual funds to affix an exclamation mark ("!") to their names caused a statistically and economically significant decline in their net flows, with a larger effect on fund inflows than outflows. The exclamation mark's impact stems from retail investors, both those that seek financial advice and those that invest independently. Mutual funds “defamed” by the exclamation mark designation actually increased their exposure to the particular risk highlighted by the regulator.
| Original language | English |
|---|---|
| Article number | 106332 |
| Journal | Journal of Banking and Finance |
| Volume | 134 |
| DOIs | |
| State | Published - Jan 2022 |
Bibliographical note
Publisher Copyright:© 2021 Elsevier B.V.
Funding
We acknowledge helpful comments and suggestions by two anonymous referees, the Associate Editor, and the Managing Editor (Carol Alexander). Additionally, we are grateful for comments on previous versions made by Meni Abudy, Effi Benmelech, Azi Ben-Rephael, Alon Eizenberg, Ido Erev, Dan Galai, Ori Heffetz, Beni Lauterbach, Doron Levit, Roni Michaely, Rafi Niv, Yossi Sa'adon, Zur Shapira, Maya Shaton, Moses Shayo, Zvi Stepak, Alexander Vedrashko, Yishay Yafeh, Ohad Zada, Ilknur Zer, seminar participants at the Bank of Israel, SEC, Bar-Ilan University, SFU Beedie, the Hebrew University of Jerusalem, the 2017 I-CORE (the Israeli Centers for Research Excellence) Conference participants, the European Financial Management Association 2018 Annual Meeting (Milano) participants, the Financial Management Association 2018 Annual Meeting (San Diego), the Third Israel Conference on Behavioral Finance 2019, and the 7th Paris Financial Management Conference (PFMC-2019) participants for helpful comments and suggestions. We further thank a large Israeli commercial bank for providing its internal mutual funds ranking data. We are also grateful to Matan Waynberg, Tomer Yafeh, and Orr Yidov for outstanding research assistance. Zvi Wiener thanks the Krueger Fund, and the Sanger Family Chair in Banking and Risk Management for support of this research. We acknowledge helpful comments and suggestions by two anonymous referees, the Associate Editor, and the Managing Editor (Carol Alexander). Additionally, we are grateful for comments on previous versions made by Meni Abudy, Effi Benmelech, Azi Ben-Rephael, Alon Eizenberg, Ido Erev, Dan Galai, Ori Heffetz, Beni Lauterbach, Doron Levit, Roni Michaely, Rafi Niv, Yossi Sa'adon, Zur Shapira, Maya Shaton, Moses Shayo, Zvi Stepak, Alexander Vedrashko, Yishay Yafeh, Ohad Zada, Ilknur Zer, seminar participants at the Bank of Israel, SEC, Bar-Ilan University, SFU Beedie, the Hebrew University of Jerusalem, the 2017 I-CORE (the Israeli Centers for Research Excellence) Conference participants, the European Financial Management Association 2018 Annual Meeting (Milano) participants, the Financial Management Association 2018 Annual Meeting (San Diego), the Third Israel Conference on Behavioral Finance 2019, and the 7th Paris Financial Management Conference (PFMC-2019) participants for helpful comments and suggestions. We further thank a large Israeli commercial bank for providing its internal mutual funds ranking data. We are also grateful to Matan Waynberg, Tomer Yafeh, and Orr Yidov for outstanding research assistance. Zvi Wiener thanks the Krueger Fund, and the Sanger Family Chair in Banking and Risk Management for support of this research.
| Funders | Funder number |
|---|---|
| 7th Paris Financial Management Conference | PFMC-2019 |
| Bank of Israel | |
| European Financial Management Association | |
| Krueger Fund | |
| Bar-Ilan University | |
| Hebrew University of Jerusalem | |
| Simon Fraser University | |
| Singapore-ETH Centre |
Keywords
- Investor attention
- Investor protection
- Mutual funds
- Regulation