Portuguese Economic Journal

, Volume 10, Issue 2, pp 129–147 | Cite as

Does performance explain mutual fund flows in small markets? The case of Portugal

Original Article


We study the performance reaction of investors in a specific small market context. Our sample includes all Portuguese open-end equity funds that invested in stocks issued by Portuguese companies in the period December 1993–June 2009. Instead of the convex flow–performance relationship usually documented for the US, we find an absence of reaction to past performance. We find no evidence to support the “smart money effect”, given that capital flows do not favour next period performance winners. We also document persistence of fund flows. Our results are consistent with the idea that large financial intermediaries have the capacity “to drive” their customers to funds with larger fees.


Mutual fund Performance reaction Investor behaviour Small markets and regulation 

JEL Classification

G21 G23 G28 


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Copyright information

© Springer-Verlag 2010

Authors and Affiliations

  1. 1.CEF.UP, Faculty of EconomicsUniversity of PortoPortoPortugal
  2. 2.CMVM, Portuguese Securities CommissionLisboaPortugal
  3. 3.CEFAGE-UEUniversidade de ÉvoraÉvoraPortugal

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