Mutual Funds and Stock and Bond Market Stability

F.R. Edwards and Xiaoyan Zhang ()

Working Papers from Columbia - Graduate School of Business

Abstract: The unprecedented growth of mutual funds has raised questions about the impact of mutual fund flows on stockand bond prices. Many believe that the equity bull market of the 1990's is atributable to the huge flows of funds into equity mutual funds during this period, and that a withdrawal of those funds could send stock prices plummeting. This article investigates the relationship between aggregate monthly mutual fund flows (sales, redemptions, and net sales) and stock and bond monthly returns during a 30-year period beginning January 1961 utilizing Granger causality and instrumental variables analysis.

Keywords: BONDS; STOCK MARKET (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Pages: 45 pages
Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:fth:colubu:97-22

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