The Determinants and Implications of Mutual Fund Cash Holdings: Theory and Evidence

Abstract

In this article, I examine the determinants and implications of equity mutual fund cash holdings. In cross‐sectional tests, I find evidence generally supportive of a static trade‐off model developed in the article. In particular, small‐cap funds and funds with more‐volatile fund flows hold more cash. However, I do not find that fund managers with better stock‐picking skills hold less cash. Aggregate cash holdings by equity mutual funds are persistent and positively related to lagged aggregate fund flows. Aggregate cash holdings do not forecast future market returns, suggesting that equity funds as a whole do not have market timing skills.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 84 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.