Opportunity Cost and Investor Behavior: Performance-Flow Relationship in Mutual Funds

Opportunity Cost and Investor Behavior: Performance-Flow Relationship in Mutual Funds | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Opportunity Cost and Investor Behavior: Performance-Flow Relationship in Mutual Funds Yi-Ju Chien This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7774963/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This study investigates the impact of real interest rates on the performance-flow relationship (PFR) in mutual funds, highlighting the role of opportunity costs in investor decision-making. A 1% rise in real interest rates increases PFR by 0.365%, reflecting heightened investor sensitivity to past performance, particularly in actively managed funds and those delivering superior returns. Sub-group analyses confirm these findings: index funds exhibit weaker PFR responses due to their passive nature, institutional investors rely less on past performance under high-rate conditions, and value funds show lower performance sensitivity compared to growth funds. In contrast, retail investors are significantly more responsive to both regular and extreme returns. These results underscore how macroeconomic conditions shape capital allocation and offer insights for fund managers and policymakers navigating dynamic economic environments. Opportunity Cost Interest Rates Mutual Funds Performance-Flow Relationship (PFR) Investor Behavior Equity Funds Macroeconomic Variables Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-7774963","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":526862712,"identity":"1b09b348-f430-48c3-b797-90b2a588ca97","order_by":0,"name":"Yi-Ju 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