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


  • 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.

published proceedings

  • Journal of Financial Economics

altmetric score

  • 3

author list (cited authors)

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

citation count

  • 120

complete list of authors

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

publication date

  • January 2015