Transient Emotions, Perceptions of Well-being, and Mutual Fund Flows
19 Pages Posted: 31 Dec 2020 Last revised: 16 Jun 2021
Date Written: October 29, 2020
Investors' sentiment is typically proxied by aggregate measures. However, it is composed of distinguishable elements, including impermanent emotions and subjective appraisals of well-being. We show that experiencing transient happiness is associated with flows to mutual funds in the following month. When considering funds' investment style, heterogeneous effects arise. Happiness and perceived well-being correspond with flows to growth funds but not value funds. Ultimately, broad measures of sentiment may conceal nuances of investor behavior, which can potentially affect asset prices through investment style preferences.
Keywords: Investor behavior, portfolio choice, sentiment.
JEL Classification: G10, G23, G41.
Suggested Citation: Suggested Citation