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Aggregate mutual fund flows and security returns

Authors
Journal
Journal of Financial Economics
0304-405X
Publisher
Elsevier
Publication Date
Volume
39
Identifiers
DOI: 10.1016/0304-405x(95)00827-2
Keywords
  • Mutual Funds
  • Investment Flows
  • Momentum
  • Price Pressures

Abstract

Abstract In this paper I find that aggregate security returns are highly correlated with concurrent unexpected cash flows into mutual funds, but unrelated to concurrent expected flows. An unexpected inflow equal to 1% of total stock fund assets ($4.75 billion) corresponds to a 5.7% increase in the stock price index. Further, fund flows are correlated with the returns of the securities held by the funds, but not with the returns of other types of securities. I find evidence of a positive relation between flows and subsequent returns and evidence of a negative relation between returns and subsequent flows.

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