Chasing their tails: Inflow momentum and yield chasing among provident fund investors in Israel

This paper examines the short-term relationship between provident fund yields and investment in provident funds. Using Panel VAR regressions, we find that there is short-term momentum in provident fund yields and flows and investors engage in short-term yield chasing. We also find positive effect of flows on short-term yields. We reinforce these conclusions by dividing our sample to pre-crisis, crisis and post-crisis estimation and confirming our main results in the sub-periods. Additional evidence seems to suggest that investor yield chasing is affected by fund risk and management fees.