What Determines Investors' Purchases and Redemptions?

This study examines the investment flows of Spanish domestic equity funds. Increasing research is specialized in analyzing the determinants of fund flows, but few studies have been able to investigate buying and selling behavior separately. Unique data from Spain allow us to tackle this issue by using exact information of purchases and redemptions. We find that investment flows are sensitive to past performance, though this sensitivity is more noticeable when using inflows and outflows in contrast to implied flows. Furthermore, our empirical results suggest asymmetric behavior of investors given that purchases are better explained by fund return than redemptions. In general, investors are risk averse and fee-sensitive and do not value greater size of Spanish equity funds.