Fund Flows, Liquidity, and Asset Prices

49 Pages Posted: 26 Mar 2019 Last revised: 24 Aug 2020

Date Written: July 13, 2020


This paper tests whether mutual funds on aggregate matter for the equilibrium stock returns due to (i) uncertain fund flows, which directly affect fund size and managers' income; and (ii) time-varying liquidity costs of assets. I find the aggregate shocks to fund flows enter the pricing kernel in equilibrium and price 100 liquidity, fund flow beta, size, book-to-market, profitability, and investment portfolio returns net of liquidity costs. The risk prices for the aggregate flow shocks are similar across the separate portfolios and different model specifications, supporting the prediction that one pricing kernel of mutual funds prices a range of cross-sections.

Keywords: Intermediary asset pricing, Mutual fund flows, Liquidity, Equity cross section

JEL Classification: G12, G20, G23

Suggested Citation

Kim, Minsoo, Fund Flows, Liquidity, and Asset Prices (July 13, 2020). Available at SSRN: or

Minsoo Kim (Contact Author)

University of Melbourne ( email )


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