Market returns and mutual fund flows
With the increased popularity of mutual funds come increased concerns. Namely, could a sharp drop in stock and bond prices set off a cascade of redemptions by mutual fund investors and could the redemptions exert further downward pressure on asset markets? The authors analyze this relationship by using instrumental variables--a measuring technique previously unapplied to market returns and mutual fund flows--to determine the effect of returns on flows. Despite market observers' fears of a downward spiral in asset prices, the authors conclude that the short-term effect of market returns on mutual fund flows typically has been too weak to sustain such a spiral.
Volume (Year): (1997)
Issue (Month): Jul ()
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- Michael J. Fleming & Eli M. Remolona, 1997.
"What moves the bond market?,"
9706, Federal Reserve Bank of New York.
- Charles Lee & Andrei Shleifer & Richard Thaler, 1990.
"Investor Sentiment and the Closed-End Fund Puzzle,"
NBER Working Papers
3465, National Bureau of Economic Research, Inc.
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