Mutual fund flows, expected returns, and the real economy

Stephan Jank

Journal of Banking & Finance, 2012, vol. 36, issue 11, 3060-3070

Abstract: This paper investigates the relation between mutual fund flows and the real economy. The findings of this paper support the theory that the positive co-movement of flows into equity funds and stock market returns is explained by a common response to macroeconomic news. Variables that predict the real economy as well as the equity premium – in particular dividend-price ratio, default spread, relative T-Bill rate and consumption-wealth ratio – are related to fund flows and can account for the correlation of flows and market returns. Furthermore, consistent with the information-response hypothesis, mutual fund flows are forward-looking and predict real economic activity.

Keywords: Aggregate mutual fund flows; Portfolio choice; Time-varying equity premium (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Working Paper: Mutual fund flows, expected returns, and the real economy (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:11:p:3060-3070

DOI: 10.1016/j.jbankfin.2012.07.004

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