Abstract
To investigate if the mutual fund flows have been a driving factor in the US stock market at the macro level, we combine information from the stock market with information from bond and money markets in a system method. The empirical evidence from Seemingly Unrelated Regression Error Correction Model (SURECM) and Granger and Sims causality tests in a system indicates that the fund flows are weakly exogenous and stock performance causes fund flows, implying that investors move their money to the securities that yield higher returns to rebalance their investment portfolios in the US market.
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