Douglas Leone Leite
Master's – The smart-money effect and the persistence of flows in the Brazilian investment fund market
Advisor: Prof. Dr. Francisco Henrique Figueiredo de Castro Junior
Comission: Comissão: Profs. Drs. Lucas Ayres Barreira de Campos Barros, Joelson Oliveira and Andrea Maria Accioly Fonseca Minardi
Link YouTube: https://youtu.be/8ZiY5BslItk
The purpose of the research was to investigate the existence of the smart-money effect in the Brazilian market of stock investment funds. Through the analysis of abnormal returns using the Fama & French (1993) and Carhart (1997) models, it was concluded that in the period from 2005 to 2019 there is no evidence to support the existence of the smart-money effect. However, when analyzing institutional and non-institutional funds separately, it was noted that the first group had the capacity to obtain higher abnormal returns through the allocation of resources among the funds. These results support the existence of the smart-money effect for institutional funds in the Brazilian market. Finally, through an analysis by subperiods, it was concluded that this effect is not consistent over time, indicating that although institutional investors have the ability to select funds with better future performance, it can be reduced by external factors. This research contributes to the literature regarding the smart-money effect with the scope of a new period of analysis and evidence that can serve as basis for future research.
*Abstract provided by the author