Market returns and mutual fund flows

Debbie Gruenstein, Paul Kleiman and Eli Remolona

Economic Policy Review, 1997, vol. 3, issue Jul, 33-52

Abstract: 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.

Keywords: Stock - Prices; Mutual funds (search for similar items in EconPapers)
Date: 1997
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