Analysis of investor behavior in dividend yield funds

Abstract

Dividend yield funds are popular in the Japanese investment trust fund market recently, especially in the category of “foreign bonds“. In this study, we focus on the behavior of investors who buy and sell dividend yield funds and analyze investors behavior by comparing these with non (less) -dividend yield funds in terms of addiction and time preference.
We find that the net flow of dividend yield funds, unlike non (less) -dividend yield funds, are not sensitive to short-term fund performance. This result indicates that investors who buy and sell dividend yield funds derive utility from dividend, not only explained by traditional framework of the fund flow-performance relationship. However, the longer the measurement period, the more sensitive the net flow of dividend yield funds are to long-term fund performance. These findings suggest that preferences of dividend yeild funds investors could be represented by a non-constant rate of time preference such as hypobolic discounting.