Mutual Fund Cash Flows and Stock Market Performance

Mutual Fund Cash Flows and Stock Market execution of instrument* During the decade of the 1990’s through the yr 2001 there were or so major shifts in the deployment of investment assets. Based on a variety of measures, mutual cash grew dramatically as vehicles for invest in portfolios of stock. Specifically lolly cash flows into blondness funds grew from $13 billion in 1990 to $310 billion in the year 2000.1 During that same period the number of equity funds locomote from 1,100 to 4,395, while the number of accounts in those funds increased from 22 million to 162 million. The cumulative effect of the new money injected into equity funds, together with reinvestment of dividends, plus the attendant stock price delay has produced a phenomenal growth in total last(a) assets. The market value of those assets mushroomed from $239 billion in 1990 to $3,962 billion in 2000. Granted that funds have become major players in equity markets, how important is their influence compared to opposite drivers of market exertion? The investment press and business news media normally thin their attention on earnings growth, interest rate movements and other relevant financial and economic indicators. However, there is very minute in the professional and academic investment literature analyse the impact of mutual fund cash flows to the aforementioned variables. The map of this study is to provide some focus, comparison, and perspective on the brilliance of mutual fund flows.



It presents evidence that mutual fund flows may be a very significant factor in explaining monthly-movements in stock market transcends, and it provides some estimates on equitable how large the impact might be. Specification of Variables and Causal Relationships The staple model deployed in our study includes other important factors and liquidity variables in addition to mutual fund flows. The model specifies that the return on the stock market is a function of net flows into equity mutual funds, the...

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