Abstract

The growth in mutual fund investment has been substantial in the past decades. As a result, mutual funds are now one of the largest owners of equities. For example, in 2003 mutual funds owned almost 30 percent of outstanding equities in the USA and 15 percent in Europe (Fefsi, 2003). A growing body of research is investigating how mutual fund flows and stock prices are related (for example, Warther, 1995; Choe, Ko and Stulz, 1999; Fant, 1999; Edelen and Warner, 2001; Froot, O’Connel and Seasholes, 2001; Bekaert, Harvey and Lumsdaine, 2002). These studies document in general that there is a positive relationship between fund flows and stock prices. For the US market, for example, Warther (1995) reports that an unexpected flow into mutual funds of 1 percent of total stock fund assets corresponds to a 5.7 percent increase in the stock price index.

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.