54 Pages Posted: 2 Aug 2019 Last revised: 22 Oct 2019
Date Written: July 29, 2019
We estimate apples-to-apples comparisons of flows to active mutual funds, index mutual funds, and exchange traded funds (ETFs). The positive contemporaneous correlations between market returns and aggregate flows that were commonplace for active funds are now only prominent for ETFs. The monthly flow-performance relation of ETFs and index funds is larger than active funds. Annually the relation of active funds and ETFs is similar, while the index fund relation is muted. Category performance drives the relation. Extant theories of fund flows are hapless in explaining our results. Consistent with existing theories, flow-induced fire sales and trading are similar for all vehicles.
Keywords: Investment Flow, ETFs, Mutual Funds, Passive Investment
JEL Classification: G12, G14, G23
Suggested Citation: Suggested Citation