A Self-Exciting Model for Mutual Fund Flows: Investor Behaviour and Liability Risk
Darolles, Serge; Le Fol, Gaëlle; Lu, Yang; Sun, Ran (2018), A Self-Exciting Model for Mutual Fund Flows: Investor Behaviour and Liability Risk, AFFI, 2018-05, Paris, France
Type
Communication / ConférenceDate
2018Conference title
AFFIConference date
2018-05Conference city
ParisConference country
FranceMetadata
Show full item recordAuthor(s)
Darolles, SergeDauphine Recherches en Management [DRM]
Le Fol, Gaëlle
Dauphine Recherches en Management [DRM]
Lu, Yang

CEntre de REcherches en MAthématiques de la DEcision [CEREMADE]
Sun, Ran
Dauphine Recherches en Management [DRM]
Abstract (EN)
This paper analyses the purchase and redemption behaviour of mutual fund investors and its implications on fund liquidity risk. We collect a novel set of proprietary data which contains a large number of French investors holding funds with various degrees of asset liquidity. We build a Self-Exciting Poisson model capturing fund flows' clustering effects and over-dispersion. The model improves the forecast accuracy of future flows and provides a reliable risk indicator (Flow Value at Risk.) Accordingly, we introduce the notion of liability risk where investor's behaviour increases mutual fund liquidity risk. We further decompose fund flows into investor categories. We find that investors exhibit high heterogeneous behaviour, and a lead-lag relation exists between them. Finally, we control flow dynamics for various economic conditions. We show that although flows evolve with economic conditions, investor's behaviour stays the main significant determinant of flows' randomness. Our findings encourage fund manager to adopt an ALM approach.Subjects / Keywords
Financial Econometrics; Hedge Funds/Mutual Funds; Market Microstructure/LiquidityRelated items
Showing items related by title and author.
-
Darolles, Serge; Le Fol, Gaëlle; Lu, Yang; Sun, Ran (2019) Communication / Conférence
-
Le Fol, Gaëlle; Darolles, Serge; Sun, Ran; Lu, Yang (2018) Document de travail / Working paper
-
Darolles, Serge; Le Fol, Gaëlle; Lu, Yang; Sun, Ran (2019) Article accepté pour publication ou publié
-
Darolles, Serge; Dudek, Jérémy; Le Fol, Gaëlle (2014) Communication / Conférence
-
Darolles, Serge; Dudek, Jérémy; Le Fol, Gaëlle (2016) Article accepté pour publication ou publié