Market Returns and Mutual Fund Flows

20 Pages Posted: 19 Nov 2007

See all articles by Eli M. Remolona

Eli M. Remolona

Bank for International Settlements (BIS) - Monetary and Economic Department

Paul Kleiman

affiliation not provided to SSRN

Debbie Gruenstein Bocain

affiliation not provided to SSRN

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: instrumental variables, returns, flows

JEL Classification: E44, G14, G23

Suggested Citation

Remolona, Eli M. and Kleiman, Paul and Gruenstein Bocain, Debbie, Market Returns and Mutual Fund Flows. Economic Policy Review, Vol. 3, No. 2, July 1997, Available at SSRN: https://ssrn.com/abstract=1017533

Eli M. Remolona (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

IFC 2 Bldg, 78/F
Central
Hong Kong
Hong Kong
+852 2982 7150 (Phone)
+852 2982 7123 (Fax)

Paul Kleiman

affiliation not provided to SSRN ( email )

No Address Available

Debbie Gruenstein Bocain

affiliation not provided to SSRN ( email )

No Address Available

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