Smart money, dumb money, and capital market anomalies Academic Article

abstract

• © 2015 Elsevier B.V. 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.

authors

• Sorescu, Sorin

author list (cited authors)

• Akbas, F., Armstrong, W. J., Sorescu, S., & Subrahmanyam, A

complete list of authors

• Akbas, Ferhat||Armstrong, Will J||Sorescu, Sorin||Subrahmanyam, Avanidhar

publication date

• January 1, 2015 11:11 AM

publisher

• Elsevier BV  Publisher

published in

• Journal of Financial Economics  Journal

keywords

• Hedge Funds
• Mutual Funds
• Sock Return Anomalies

Digital Object Identifier (DOI)

• 10.1016/j.jfineco.2015.07.003

start page

• 355

end page

• 382

volume

• 118

issue

• 2