The exclamation mark of Cain: Risk salience and mutual fund flows *

We study a regulation that increased mutual funds' risk salience through name change. Using daily fund flow data and several identification strategies, we find that requiring certain fixed income mutual funds to affix an exclamation mark (!) to their names caused a statistically and economically significant decline in their net flows, with a larger effect on fund inflows than outflows. The exclamation mark's impact stems from retail investors, both those that seek financial advice and those that invest independently. Mutual funds defamed by the exclamation mark designation actually increased their exposure to the particular risk highlighted by the regulator. (c) 2021 Elsevier B.V. All rights reserved.

Automated summary

The study shows that adding an exclamation mark to mutual fund names increased risk salience and led to a significant decline in net flows, particularly affecting fund inflows more than outflows, with the impact primarily driven by retail investors.