Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 555: Information Costs and Mutual Fund Flows

Stefan Engström () and Anna Westerberg ()
Additional contact information
Stefan Engström: Dept. of Finance, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Anna Westerberg: National Social Insurance Board

Abstract: This paper examines how investor and capital flows into mutual funds in the Swedish pension system are related to fund characteristics. Similarly to U.S. studies, we show that individuals chase past returns and have a strong preference for lower-fee funds. However, our results suggest that past returns are less important than previous studies suggest. A more important determinant of fund inflows is information costs. For instance, foreign-based funds with a track record similar to that of domestic funds attract fewer investors and receive less capital. Moreover, new funds without a track record also receive lower inflows.

Keywords: Flows; Information; Pension System; Portfolio Choice

JEL-codes: G11; G23; H55

31 pages, January 28, 2004

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