Chasing Their Tails: Inflow Momentum and Yield Chasing among Provident Fund Investors in Israel

08/08/2011 |  Porath Yehuda, Steinberg Nadav
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Finacial Markets and Financial Stability
Abstract
This paper examines the short-run relationship between provident fund yields and investment in provident funds. Using Panel VAR regressions, we find that there is short-term momentum in provident fund yields and flows and investors engage in short-term yield chasing. We also find positive effect of flows on short term yields. We reinforce these conclusions by dividing our sample to pre-crisis, crisis and post-crisis estimation and confirming our main results in the sub-periods. Additional evidence seems to suggest that investor yield chasing is affected by fund risk and management fees.
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