The information content of Australian managed fund ratings

Robert W. Faff, Jerry T. Parwada*, Hun Lune Poh

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

6 Citations (Scopus)

Abstract

We examine the information content of managed fund ratings for Australian retail investors. Because fund ratings, premised on a quantitative-qualitative model, are highly transitory, we question whether investors formulate their investment decisions with respect to changes in ratings and whether ratings, in turn, react to fund flows. We find that information regarding fund flows can be obtained from ratings, and that rating changes can have far-reaching effects. Investors flock to newly upgraded funds while they penalize those that have been downgraded by withdrawing funds. Investors are constantly anticipating ratings revisions, particularly downgrades, and we attribute this phenomenon to the role of qualitative factors in the ratings.

Original languageEnglish
Pages (from-to)1528-1547
Number of pages20
JournalJournal of Business Finance and Accounting
Volume34
Issue number9-10
DOIs
Publication statusPublished - 2007
Externally publishedYes

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