Discussion paper

DP11476 Investor-Stock Decoupling in Mutual Funds

We investigate whether mutual funds whose investors and stocks are decoupled (i.e., investor location does not coincide with that of the stock holdings) benefit from a natural hedge as they have fewer outflows during market downturns and fewer inflows during upturns. Using a sample of equity mutual funds from 26 countries, we find that funds with higher investor-stock decoupling exhibit higher performance and this is more pronounced during the 2007-2008 financial crisis. We also find that decoupling allows fund managers to take less risk, be more active, and tilt their portfolios toward smaller and less liquid stocks.


Massa, M, M Ferreira and P Matos (2016), ‘DP11476 Investor-Stock Decoupling in Mutual Funds‘, CEPR Discussion Paper No. 11476. CEPR Press, Paris & London. https://cepr.org/publications/dp11476