Salience and Mutual Fund Investor Demand for Idiosyncratic Volatility

• 成果类型: Article
• 署名作者: Clifford, Christopher P.; Fulkerson, Jon A.; Jame, Russell; Jordan, Bradford D.
• 署名单位: University of Kentucky; University System of Ohio; University of Dayton; State University System of Florida; University of Florida
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.3716
• 发表日期: 2021
• 页码: 5234-5254
• 关键词: IDIOSYNCRATIC VOLATILITY; limited attention; Mutual funds; SALIENCE

摘要

We find that mutual fund investors are more likely to both purchase and redeem funds with high idiosyncratic volatility (IV). Investors' tendency to purchase high IV funds is largely driven by high IV funds having more extreme returns, which increases the salience of the fund. Including flexible controls for extreme past returns over multiple horizons decreases the effect of IV on new investment, and experimental evidence corroborates that increasing the salience of extreme returns increases investor demand for IV. Demand for IV is higher among retail investors and funds with otherwise lower salience. Collectively, the evidence suggests that extreme returns attract investor attention and contribute to investors' risk seeking behavior when purchasing mutual funds.