Do fund flows cause the value and momentum effects?

Do fund flows cause the value and momentum effects?

05-05-2016 | From the field

In this study the authors argue that the value and momentum effects may be the result of fund flows. They propose a model in which flows between investment funds are triggered by changes in fund managers’ efficiency, which investors either observe directly or infer from past performance.

  • David Blitz
    Head of Quant Research

They find that momentum arises if fund flows exhibit inertia, and because rational prices do not fully adjust to reflect future flows. A value (reversal) effect arises because flows push prices away from fundamental values.

Besides momentum and value effects, the model also predicts co-movement, lead-lag effects and amplification, with these being larger for high-idiosyncratic-risk assets. We like this study because it helps to rationalize the existence of the value and momentum effects, which are typically attributed to ‘irrational’ investor behavior.

Stay informed on Quant investing with monthly mail updates
Stay informed on Quant investing with monthly mail updates
From the field
From the field

Our researchers publish many whitepapers based on their own empirical studies; they also follow quantitative research done by others.

Read all articles


The information contained in the website is solely intended for professional investors. Some funds shown on this website fall outside the scope of the Dutch Act on the Financial Supervision (Wet op het financieel toezicht) and therefore do not (need to) have a license from the Authority for the Financial Markets (AFM).

The funds shown on this website may not be available in your country. Please select your country website (top right corner) to view the products that are available in your country.

Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports, which can be all be obtained free of charge at this website and at the Robeco offices in each country where Robeco has a presence.

By clicking Proceed I confirm that I am a professional investor and that I have read, understood and accept the terms of use for this website.