SMART MONEY EFFECT OF RMF AND LTF FLOWS

Abstract

This study examines the short term mutual fund selection ability of investors in Thailand which calls “Smart money effect” Using the open-end domestic equity fund in Thailand between 2004 and 2015.The results indicate that the smart money effect don’t appear in the overall investor in Thailand. By the way, it shows the Dumb money effect. That is, they are not able to move their money into(out of) the future good(poor) performance. This paper separate the group of mutual fund into LTF, RMF (mutual fund which have individual tax benefit) and OTHER (mutual fund which don’t have individual tax benefit).However, after separate the group of investors in each type of fund, it isn’t show the strong evidence that the Smart money effect or Dumb money effect occur on each group of investors. On the other hands, the dumb money effect appears in only overall investors. This result is important to provide the useful information for regulators to review their rule and to remind the overall investors to care about their portfolio return.