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Title: | Aggregate Mutual Fund Flows and Stock Market Returns. Evidence from the US Market |
Authors: | Kartsaklas, A Karanasos, M Omran, H |
Keywords: | mutual funds;feedback trading;price pressure;stock returns |
Issue Date: | Sep-2024 |
Publisher: | Brunel University of London |
Citation: | Kartsaklas, A., Karanasos, M. and Omran, H. (2024) Aggregate Mutual Fund Flows and Stock Market Returns. Evidence from the US Market. Uxbridge: Brunel University London, [unpublished], pp. 1 - 38. |
Abstract: | This study contributes new empirical evidence on the dynamic relation between mutual fund flow and stock market return using a multivariate GARCH model. Data consists of daily domestic US mutual funds from 1998 to 2012, while the result robustness is tested under alternative GARCH specifications and sub-periods that cover the US financial crisis, bear/bull and cyclical market phases. In the pre-crisis period, the effect of past mutual fund flows on S&P stock returns is negative indicating that higher inflows (outflows) lead to lower (higher) future stock returns. For the post-crisis period, the correlation between lagged fund flows and S&P returns is positive. Interestingly the negative effect from past flows to stock returns is significantly more pronounced in bearish periods compared to bullish ones. Moreover, a positive relationship between mutual fund flows and past stock market returns is reported across all periods and market phases. Finally, the simultaneous relation between returns and fund flows is uniformly positive and significant. However, the dynamic conditional correlations reveal a few concentrated instances of negative simultaneous correlations between flows and returns. |
Description: | JEL classification: G10, G12, G14. This is a working paper. It is not certified by peer review. |
URI: | https://bura.brunel.ac.uk/handle/2438/30943 |
Other Identifiers: | ORCiD: Aris Kartsaklas https://orcid.org/0000-0002-9302-8736 ORCiD: Menelaos Karanasos https://orcid.org/0000-0001-5442-3509 |
Appears in Collections: | Dept of Economics and Finance Research Papers |
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